Feeling overwhelmed by credit card bills, student loan payments, or other debts? Seeking out the best debt relief companies can help you get your financial obligations under control.
What Is Debt Relief?
Debt relief encompasses a range of strategies aimed at making debt more manageable. The specific form of debt relief that is most suitable for you depends on the types of debts you have and the areas where you need the most assistance.
For Example, if you are struggling to pay off credit card bills, you may require credit card debt relief. On the other hand, if you have multiple types of debt, debt consolidation may be the right option for you.
Other forms of debt relief include credit counseling, debt management plans, and debt settlement. Although these methods differ, they all share the common goal of helping individuals find a practical way to eliminate their debt.
Top 5 Best Debt Relief Companies in USA
1
Accredited Debt Relief
- Pay only if they successfully reduce your debt
- A+ BBB rating and positive customer reviews
- Free consultation and savings estimate
9.8
EXCELLENT
On Accredited Debt Relief’s Website
2
Freedom Debt Relief
- Customer support is available seven days a week
- A+ BBB rating and positive customer reviews
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3
National Debt Relief
- Client portal, calculators and more online resources
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How Does Debt Relief Work?
Debt relief helps you reduce your debt burden by providing assistance in managing debts and choosing a suitable relief option.
Some of the ways debt relief can work include:
- Interest rate reductions
- Changes to credit card or loan repayment terms
- Reducing the principal amount owed
- Consolidating debt
- Loan Refinancing
Bankruptcy can also be considered a form of debt relief, but it can have significant impacts on your credit score.
When comparing debt relief programs or options, it’s important to consider both the good and the bad.
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When You Should and Should Not Seek Debt Relief
Debt relief may not be suitable for everyone, so it’s important to understand for whom it is appropriate before exploring the options.
You may consider debt relief if:
- You’re behind on credit card bills or other loan payments.
- You’re not behind on bills yet, but you’re struggling to afford your payments.
- You’ve tried to manage your debt on your own, but you can’t seem to make any progress.
- You’ve contemplated filing bankruptcy.
Debt relief may not work for you if:
- You’re continuing to add to your debt balances.
- You’re not interested in making a long-term commitment to repaying debt.
If you are still accumulating new debt, simply addressing debt relief may not be sufficient. It may also be necessary to examine the spending habits that are perpetuating your debt.
Debt Management Plans
If you’re working with a credit counselor or a debt relief program, one possibility they may suggest is a debt management plan. A debt management plan, or DMP, works like this:
- You choose which debts to enroll in the program.
- You make one single payment to the debt management plan each month.
- That payment is distributed among your creditors, according to the terms of the plan.
Debt management plans are similar to debt consolidation in that you only have one payment to make. However, this type of debt relief program doesn’t require you to take out a loan or open a balance transfer credit card. Depending on the program, you may be able to get your interest rate lowered or have certain fees waived.
Under a debt management plan, you may receive better interest rates or relief from fees, but you are still responsible for repaying the entire principal amount.
What to Know Before You Apply for Debt Relief
Debt relief programs can assist in reducing your debt burden, but it’s important to carefully consider this decision as there may be significant trade-offs.
Before getting started with debt relief, here are three important things to consider.
1. Interest
Debt consolidation loans or lines of credit and 0% balance transfer offers can help with credit card debt relief, but it’s important to consider the associated costs. Ideally, consolidating debt should result in a lower interest rate.
A lower APR means that more of your monthly payment goes toward the principal, allowing you to pay off your debt more quickly. You’ll also accrue less interest over the repayment period.
If you’re considering debt consolidation, it’s important to first assess the rates you may qualify for based on your credit score. Additionally, if you’re exploring options such as a debt management plan, inquire about the possibility of a rate reduction when working out repayment terms.
2. Fees
There may be fees associated with certain debt relief options, and it’s important to consider them when deciding if the cost is worth it.
For example, credit counselors may or may not charge a fee to help you create a budget and spending plan. When it comes to debt consolidation loans, watch out for loan origination fees and prepayment penalties.
If you’re using a 0% APR balance transfer credit card to consolidate debt, you may have to pay a balance transfer fee. If you’re considering a debt management plan, there may be a monthly fee to enroll. Additionally, companies that negotiate debt settlement may charge a fee for their services, sometimes as much as 15% to 25% of the amount settled or forgiven.
Since fees can increase the total amount you have to repay, it’s important to understand what you’re paying upfront and how it can impact your long-term finances.
3. Scams
When you’re interested in debt relief services, such as credit counseling, a debt management plan, or debt forgiveness, it’s important to make sure that the company you’re working with is legitimate. Otherwise, you run the risk of falling victim to a debt relief scam.
You also want to understand the differences among debt consolidation, debt management plans, and debt settlement, as not all providers use these terms clearly enough for you to understand what you’re getting into unless you read or listen very carefully.
As you compare debt relief companies, be aware of the following red flags:
- Demands for fees that must be paid before services can be offered
- Lack of transparency in explaining what the company does or provides
- Requests for access to personal or banking information
- Promises or guarantees that seem too good to be true
The Consumer Financial Protection Bureau (CFPB) maintains a database of consumer complaints regarding debt relief companies and other financial services providers. You can check the database, along with the Better Business Bureau, to verify a company’s reputation.
How Does Debt Relief Affect Your Credit?
Debt relief can affect your credit reports and scores, depending on the option you choose. Debt settlement can harm your credit, while a debt management plan may have a a minimal impact. Credit counseling may not affect your credit and could even help raise your score. Be sure to monitor your credit regularly and read the fine print of any relief plan for potential credit score impacts.
