Best Debt Relief And Settlement Companies of July 2024 (2024)

Our debt experts have compared 25 companies that offer debt settlement services to find the best options available. For a company to appear on this list, its debt settlement services must be widely available in the U.S.

• National Debt Relief: Best Debt Relief Company for Fee Transparency
• Pacific Debt Relief: Best Debt Settlement Company for an Established Track Record
• Accredited Debt Relief: Best for Quick Resolution
• Money Management International: Best Nonprofit for Debt Relief Help
• CuraDebt: Best for Negotiating Tax Debt
• New Era Debt Solutions: Best for After-Hours Customer Service
• Freedom Debt Relief: Best for Monitoring Progress with an Online Dashboard

Debt settlement can come with significant risks: It can damage your credit and be costly, and it isn’t guaranteed to work. Because of this, it’s crucial to find and work with a reputable company. The best debt relief companies are transparent about fees, have a long history of excellent customer service and are accredited by an industry watchdog such as the American Association for Debt Resolution, or AADR.

• What Is Debt Settlement or Debt Relief?
• How Does Debt Settlement Work?
• Pros and Cons of Debt Settlement Programs
• When is Debt Settlement a Good Idea?
• How to Choose a Debt Relief Company
• How To Apply for a Debt Relief Program
• Alternatives to Debt Settlement
• Methodology
• Debt Relief FAQs

Debt settlement, sometimes referred to as debt relief, is the process of settling debts for less than the amount owed. When you settle debts, you pay an agreed-upon amount to each of your creditors. This payment ends your obligation to pay, and the remaining debt is canceled or forgiven.

Debt settlement is a form of debt relief that allows you to relinquish some of the financial burden of owing money to creditors. There are generally two options for debt settlement:

• Do-it-yourself (DIY) debt settlement
• Debt settlement companies

If the thought of learning how to negotiate credit card debt settlement seems overwhelming, it could make sense to work with a debt settlement company. The debt professionals at these companies can handle all of the heavy lifting, making it easier for you to eliminate your debts.

Debt Settlement vs. Debt Relief

Debt settlement companies are often called “debt relief” companies, which may be misleading. Unlike student loan debt relief, where your debt may be canceled, no federal programs provide debt relief. In other words, you would have to choose between settling your debt–by either paying it in full or negotiating a lower balance–or filing for bankruptcy.

You would first contact the party you owe money to—either the original creditor or a debt collector representing them—and ask about options to pay off your debt. You may be able to negotiate with creditors to pay a reduced lump sum, sometimes less than the total owed, in exchange for forgiving the remaining debt.

If you work with a debt settlement company, you may be asked to stop making payments temporarily to increase negotiation leverage. Of course, doing this could hurt your credit score, but if you’re already in a position where you can’t afford to pay your bills, this may be a better option than not paying altogether, which could result in a lawsuit or further damage to your credit score.

The debt settlement company then negotiates with creditors, aiming for a mutually agreed-upon reduced amount. Upon reaching a settlement, you would either make a lump sum payment or monthly payments, depending on the agreement.

Ultimately, paying less than you owe through debt settlement will have a negative impact on your credit score. However, it’s temporary and a better alternative than ignoring the debt altogether.

Related: Debt Settlement: How Does It Work And Is It Worth The Risks?

Who Qualifies for Debt Relief?

Anyone who has debt technically qualifies for debt settlement. Some companies may require minimum debt thresholds, but there’s no standard rule.

Discover the pros and cons of debt relief below to find out if its right for you

Pros of Debt Settlement Relief

• Reduced debt.Debt relief can lead to a significant reduction in the total amount owed.
• Avoiding bankruptcy. While debt settlement may negatively affect your credit, it doesn’t have the long-lasting repercussions that bankruptcy brings.

Cons of Debt Settlement Relief

• Credit impact. It can often negatively affect your credit score because it will appear on your credit report as a partial payment.
• No guarantee.You may not be able to settle your debt. Creditors might demand the full amount and even sue you to get it. If they win, your wages can be garnished, and they may be able to take money out of your bank account.

Risks of Debt Settlement

Along with hits to your credit, debt settlement also comes with other risks. Here are some things you should watch out for.

• Companies may continue to charge interest and late fees while you’re in the process of negotiating your debt.
• There’s no guarantee that your creditors will settle with you. You may still be on the hook for the total amount you owe.
• Debt relief companies usually charge fees for settling the debt. Fees are usually between 15% to 25% of the debt amount they’re working on.
• Debt relief scams can be hard to spot, so make sure you look into a company before working with it. Asking for money up front or guaranteeing positive results should be seen as red flags that it’s not a legitimate company.

Debt settlement may be a good idea if you can’t afford all the debt you owe but want to avoid bankruptcy’s long-term consequences. In that case, settling your debt can be a good compromise between paying in full and declaring bankruptcy.

When Is Debt Settlement Not a Good Idea?

If you need good credit to qualify for a job or for financing, such as a mortgage or personal loan, debt settlement may not be the best option.

It can negatively affect your credit score because you may be encouraged to miss payments in order to negotiate lower balances with your creditors. This is a common leverage tactic that debt relief companies use to help borrowers land payment plans they can afford.

However, because payment history makes up a large percentage (35%) of your credit score, late payments will negatively affect your credit.

Before you select a debt settlement or debt relief company, make sure you research it thoroughly. Many bad actors pose as legitimate companies (usually promising to wipe out all of your debt)and try to scam you out of money.

The Consumer Financial Protection Bureau recommends doing the following:

• Conduct a free search on the company in the CFPB’s consumer complaint database.
• Contact your state attorney general and local consumer protection agency to find out if any consumer complaints are on file about a given company.
• Some states require debt relief companies to have a license, which you can verify with your state’s attorney general.

Here are the main steps you should take when applying to a debt relief company.

1. Research companies. Identify reputable debt relief companies by reading reviews and checking ratings.
2. Verify each company’s credentials. Check accreditation with organizations like the Better Business Bureau (BBB) or the American Fair Credit Council (AFCC).
3. Gather your financial information. Collect details and documents relating to your debts, income and expenses.
4. Schedule a free initial consultation. Be ready to discuss your financial situation and options. Most debt relief companies offer free consultations to ensure you meet the requirements and understand how the process works.
5. Shop around. Not all debt settlement companies charge the same fees, so comparison shopping may save you money.
6. Compare plans. Evaluate each firm’s proposed debt relief plans and their fees, as well as features like online chat, real-time updates and other helpful tools that may differ from company to company.
7. Read the contract carefully. Review all terms, conditions and fees before signing any agreement.
8. Submit your application. Provide necessary documentation and complete the application form.
9. Follow up. If you choose to work with a company, communicate regularly with its employees to get updates on your debt relief progress.

If you’re not sure about debt settlement, there are other ways you can handle your debt that might have less of an impact on your credit score. As you decide what to do about your debt, make sure you’re choosing an affordable solution. For example, don’t pay off your debt with a loan secured by your home, because if you get behind on payments you could lose your home.

Here are some other options:

1. Meet with a credit counselor to create a personalized debt reduction plan you can afford.
2. Take out a personal loan and pay off your debts that way.
3. Consolidate your debts onto one credit card.
4. Tap into your home equity via a HELOC to pay off your debt.

Debt Settlement vs. Debt Consolidation

Debt settlement and debt consolidation are different approaches to managing multiple debts. Debt settlement negotiates a lower amount owed, while debt consolidation merges debts into a single payment. Debt settlement is for those struggling to afford current debts.

On the other hand, debt consolidation is beneficial for streamlining payments and possibly securing a lower interest rate. It typically involves options like personal loans, cash-out refinances or low-APR credit cards. While applying for new credit may cause a minor credit score dip, debt consolidation itself doesn’t harm your credit.

Related:

Debt Settlement vs. Bankruptcy

Debt settlement and bankruptcy are options for managing overwhelming debt, each with its own advantages and disadvantages. The two main differences between these options are your debt status and credit status.

With debt settlement, you’ll still owe money, but it may be less than what you initially owed. However, your credit can be repaired in a much shorter amount of time than with bankruptcy. Similarly, you won’t have the stigma of a bankruptcy on your credit report, which can affect your ability to rent and get employment.

Bankruptcy allows you to be debt-free, but the price is having it show on your credit report and public records for up to 10 years.

The choice between debt settlement and bankruptcy should depend on your circ*mstances and financial goals. Speak with a financial advisor or debt counselor if you’re unsure which path is best for you.

We reviewed 25 debt companies that offer debt settlement services to develop our list of the best debt relief companies. We analyzed each company on 18 data points in the categories of fees, customer satisfaction and experience, digital experience, history and the number of services provided. We chose the seven best debt settlement companies based on the weighting assigned to each category:

• Customer satisfaction and experience: 35%
• Fees: 25%
• History: 25%
• Digital experience: 10%
• Number of services: 5%

We considered several characteristics within each category, including its fee for relief, Better Business Bureau score, Trustpilot score, time in business and accreditation with the AADR. We also considered whether the company offers services like free consultations and credit counseling. Finally, we evaluated each company’s digital experience based on their mobile app and website. For a company to appear on this list, its debt relief services must be widely available in the U.S.