Unfortunately, debt gets out of hand quickly, and unsecured credit card debt can be very problematic. According to the G19 Federal Reserve Report, revolving consumer credit card debt has exceeded $ 1 trillion in March 2020 ($ 1.066 trillion). It is more than just the total amount of debt that is problematic; the average credit card interest rate is a staggering 16.61% .1 With statistics like these, it's no wonder consumers with debt - and especially high-interest debt - often struggle to get ahead.
Debt relief companies provide a way out of debt that may result in you paying less of your mortgage. The strategy they use is also often referred to as "debt settlement" for this reason.
We compare the top debt relief companies to find companies that offer transparent debt relief processes with consistently positive results and reasonable fees. If you're looking for a company that can help pay off your debt, you should start viewing it.
The 6 Best Debt Removal Companies of 2020
- National Debt Aid: Best Overall
- Accredited Debt Relief: Best for Debt Settlement
- DMB Finance: Best for High-Interest Credit Card Debt
- New Age Debt Solutions: Best for Customer Satisfaction
- CuraDebt: Best for Tax Payable Relief
- Freedom Debt Relief: The Best Interactive Program
What Do Debt Relief Companies Do?
Debt relief companies are non-profit organizations that help consumers pay off their debts less than they owe. These companies provide their services to clients who are so burdened with debt that they cannot find a solution.
While there are many reputable debt relief companies out there, it's important to note that the debt relief industry is riddled with scams. The Federal Trade Commission (FTC) says it's wise to be prudent about the company you work for this reason.4 You should also try to avoid working with debt relief companies that try to collect fees before they pay off your debt advertise new government programs that can help.
What Is Debt Settlement?
In general, debt relief companies turn to debt settlement as the best debt relief option. With debt settlement, these companies ask their clients to set aside a certain amount of money in an individual savings account each month. The purpose of this account is to raise money that can be used to pay off debts at a later date.
The debt relief company then negotiates with creditors on your behalf, which usually involves offering less than the amount you owe against your balance. At the end of the debt settlement program, the client must be debt-free and able to move on with their lives.
Although paying less than your debt amount may sound ideal, the Federal Trade Commission (FTC) notes that debt settlement has risks. 4 For example, a debt relief company will ask you to stop paying your bills while working to pay off your debt, which can lead to severe consequences for your credit score. Also, know that creditors are not required to pay off your debt less than the amount you owe, so there is no guarantee that your debt relief company will succeed.
What Is Debt Consolidation?
If you're wondering about the difference between debt settlement and debt consolidation, here are some details to pay attention to. Suppose debt settlement involves working with a debt relief company to settle your debt less than the amount you owe. In that case, debt consolidation requires you to issue a new financial product (usually a personal loan or balance transfer credit card) to consolidate your existing debt.
With debt consolidation, you will shift all old debt to a new loan with a lower APR or better terms. Although the goal of debt consolidation is to save money, debt consolidation can also help you go from paying multiple debt payments each month to just one.
