Debt continues to be the top cause of stress for Americans. According to the “Stress in America” report, the majority of Americans say that money (62%) and the economy (58%) are significant sources of stress (source). Stress certainly doesn’t help when it comes to making smart financial choices. It’s easy to get confused by all the debt relief options available.
Debt settlement companies can negotiate with creditors on your behalf and potentially cut your debt in half. That was the finding of a nine-year study into debt settlement programs commissioned by the American Fair Credit Council (AFCC). The study analyzed 1.9 million accounts and found that the average settlement of an account enrolled in a debt settlement program is 48% of the original balance (source). That’s less than half the initial debt.
Cutting your debt in half may sound like a no-brainer, but negotiating a debt settlement is a serious decision you should not take lightly. Finding the right company is crucial. This article will provide SuperMoney’s list of Best Debt Settlement Companies. It will also explain our methodology, so you can learn how to find reliable companies for yourself.
The CFPB’s advice on debt settlement companies
The Consumer Financial Protection Bureau provides valuable tips when choosing a debt settlement company. In a nutshell, the CFPB recommends you avoid companies that:
- Charge fees before they settle an account.
- Refer to a “new government program” that can bail you out of your credit card debt. Spoiler alert: there isn’t one.
- Guarantee they can make your debt disappear.
- Promise they can stop debt collecting actions.
- Do not provide a clear price estimate for its services.
The CFPB’s tips are a good starting point, but there are more things to consider when choosing a debt settlement company.
Keep away from companies that say debt settlement won’t hurt your credit score. It will. The same applies to firms that claim they can keep debt collectors from calling you or lenders from suing you. They can’t.
Low cost is important, but so are flexible payment options. Shy away from firms that aren’t willing to provide a clear fee schedule.
Variety of debts
Some debt settlement companies will only deal with certain types of unsecured debt, such as credit card debt. Make sure your debt settlement firm deals with the type of debt you are concerned about.
Look for companies with a clear and easy to understand website. Check user comments and customer reviews.
Check whether they are members of a major trade association, such as the American Fair Credit Council. Find out if all its debt specialists are certified by the International Association of Professional Debt Arbitrators (IAPDA).
Experience and resources
Avoid new companies. Stick with firms that have at least five years under their belt. Keep away from firms that don’t have a physical address. A post office box doesn’t count.
SuperMoney’s best debt settlement companies
Here is our list of best debt settlement companies. For more information on these and other debt settlement firms, click here.
Credit Associates Debt Relief Review
CreditAssociates was founded in 2016 in Dallas, TX. It has a lower than average debt minimum, competitive fees and it’s a member of the AFCC.
Compare the pros and cons of CreditAssociates to make a better decision.
- Competitive fees.
- Accredited by the AFCC.
- Debts of $7,500 or above qualify for these services.
- It doesn’t offer a money back guarantee.
Rescue One Financial Review
Rescue One Financial was founded by Branden Millstone and Bradley Smith in 2007. It has its headquarters in Irvine, California, but it offers services to borrowers in 22 states.
Compare the pros and cons of Rescue One Financial to make a better decision.
- Fees are lower than average.
- Member of the leading trade associations.
- Debt relief available for personal and business debts.
- Offers a money back guarantee.
- Only considers debts of over $15,000.
Debtmerica Relief Review
Debtmerica Relief is based in Santa Ana, California. It has been in business since 2006 and helped more than 20,000 clients.
Most debt settlement firms are big on promises but short on details. We love Debtmerica’s transparency when explaining the pros and cons of debt settlement programs and other debt relief strategies. Its website does a particularly good job of setting realistic expectations for its debt settlement program.
Debtmerica customers typically obtain a 45% to 60% reduction of their enrolled debt. The average fee is 21% of the debt balance. It will consider customers with as little as $10,000 in debt.
Debtmerica is a member of the American Fair Credit Council (AFCC), and all its consultants are certified by the International Association of Professional Debt Arbitrators (IAPDA).
Founded in 2006, Debtmerica is a debt resolution firm based out of Orange County, Calif., that has helped more than 20,000 people resolve their debt problems. Its average debt reduction ranges from 45% to 60% of the debt enrolled in the program and it charges a fee that ranges from 20% to 24% of the borrower’s total debt. So if for example, you had $10,000 in debt that you placed in the hands of Debtmerica Relief and it reduced it by 50%, you would owe $5,000 (50%) to your creditors and $2000 (20%)to Debtmerica Relief. You can contact Debtmerica to receive a free consultation and you won’t pay anything until your debt is settled. The company is accredited by the American Fair Credit Council (AFCC) and the International Association of Professional Debt Arbitrators (IAPDA).
Compare the pros and cons of Debtmerica Relief to make a better decision.
- It offers a high debt reduction percentage.
- The company has multiple accreditations.
- It has a good track record of helping many people resolve their debt.
- It has reasonable fees.
- You can get a free consultation.
- It doesn’t accept debts under $10,000.
Pacific Debt Inc. Review
Pacific Debt was founded in San Diego, California, in 2002. It has lower than average fees and is accredited by the leading trade organizations.
Compare the pros and cons of Pacific Debt to make a better decision.
- Low fees when compared to other debt settlement firms.
- Accredited by leading debt settlement industry trade associations.
- Debts of $10k or above qualify for these services.
- Qualified financial counselors are available.
- It doesn’t offer a money back guarantee.
National Debt Relief Review
National Debt Relief is based in New York City. It was founded in 2008 and offers debt relief services in 41 states.
This company is all about no-pressure, satisfaction guaranteed customer service. If you’re not 100% satisfied with their services you can ask for a refund without paying penalties or fees. As with all debt relief companies, you will need to create a payment plan that deposits money in a dedicated savings account. However, National Dept Relief makes it easy for you to access that money in case of an emergency, which may help you be more aggressive about your savings plan.
National Debt Relief customers who stick with the program typically reduce their debt by 30% over 24 to 48 months, or 50% if you don’t take into account fees.
National Debt Relief is a member of the American Fair Credit Council (AFCC). It requires all its consultants to be certified by the International Association of Professional Debt Arbitrators (IAPDA).
Compare the pros and cons of National Debt Relief to make a better decision.
- It has a high debt reduction percentage.
- The company is accredited by the AFCC and the IAPDA.
- Competitive fees.
- Offers a free consultation.
- It has a minimum debt amount of $7,500.
- Not available in all states.
Freedom Debt Relief Review
Freedom Debt Relief is the largest debt resolution company in the U.S. Based in San Mateo, California, Freedom Debt Relief helps debtors negotiate down debt and avoid bankruptcy. Customers commonly seek out these services when they can’t afford monthly payments and home refinancing or debt consolidation are not options.
In December of 2010, after just eight years in business, Freedom Debt Relief became the first debt resolution company in the country to resolve a total of $1 billion in consumer debt. Now, as of 2019, it has resolved over $8 billion, and more than 500,000 clients are enrolled in its services. To enroll you only need $7,500 in debt, which is a step-up from the $10k minimum most debt resolution companies require.
Freedom Debt Relief is a founding member of the American Fair Credit Council (AFCC) and a platinum member of the International Association of Professional Debt Arbitrators. As the largest and one of the most veteran debt resolution companies in the business, it was involved in establishing the 2010 Federal Trade Commission rules that regulate the industry.
Compare the pros and cons of Freedom Debt Relief to make a better decision.
- The largest company in the debt relief industry.
- Over 500,000 clients enrolled.
- Low minimum debt amount.
- Competitive rates.
- Accredited by the IAPDA and the AFCC.
- It doesn’t accept debts under $7,500.
Cura Debt Review
Established in 2000, Cura Debt is available in 37 states and has extensive experience in debt settlement. It claims to save borrowers about 40% of the debt they enroll in the program and charges a flat fee of 18-20% of the total debt. Applications are completed online, and you are able to speak with consultants via chat if you have any questions.
The company is highly recommended by users and is accredited by the AFCC and IAPDA.
Compare the pros and cons to make a better decision.
- Cura Debt is willing to work with debts as low as $7,500.
- The company has served 180,000 customers in the last 16 years.
- It has a competitive average savings rate.
- Fees are reasonable.
- It has received numerous awards for its services.
- Qualified financial counselors are available.
- Cura Debt does not offer its services to 13 states.
FAQ on Debt Settlement Companies
How much does debt settlement affect your credit score?
A debt settlement remains on your credit report for seven years. As with all debts, larger balances have a proportionately larger impact on your credit score. If you are settling small accounts—particularly if you are current on other, bigger loans—then the impact of a debt settlement may be negligible.
Is it better to pay off a debt or settle?
It is always better to pay your debt off in full if possible. Although settling an account is typically viewed more favorably than not paying it at all, a status of settled is still considered negative. Any time you don’t repay the full amount owed, it will have a negative effect on credit scores. The “settled” status will remain for seven years from the original delinquency date of the account.
How debt settlement works?
Debt settlement companies negotiate with creditors to reduce what you owe, mostly on unsecured debt such as credit cards. Settlement offers work only if it seems you won’t pay at all, so you stop making payments on your debts. Instead, you open a savings account and put a monthly payment there. Once the settlement company believes the account has enough for a lump-sum offer, it negotiates on your behalf with the creditor to accept a smaller amount.
What percentage should I offer to settle debt?
Depending on the creditor and how much you owe, you may be able to settle for anywhere from 30% to 70% of the outstanding balance of your debt. Typically, a creditor will only consider a settlement when an account is delinquent, but you should keep in mind that they’re not required to accept your offer.
Can I buy a house after debt settlement?
Debt settlement may compromise your ability to buy a house but that does not mean it is not a good idea. If you cannot pay off your debts for now, you really cannot buy a house just yet. The other thing that will be evident after debt settlement is that fact that your credit score is now lower than before.
Looking for more options? Would you like to read consumer reviews on debt settlement companies before you commit to a debt settlement program? Click here for consumer and expert reviews on dozens of debt settlement firms.
Not sure if debt settlement is right for you? Get a free initial consultation with a debt specialist who can help you understand your options.