Debt relief is a series of financial strategies designed to reduce credit card and other unsecured debts to make them easier to repay. Debt relief includes debt consolidation, credit counseling, debt settlement or even bankruptcy.
Of these, debt settlement is the most common form of debt relief. It’s when a third-party company negotiates with your creditors on your behalf to reduce the amount you owe. It’s not the same thing as a debt consolidation – which is rolling all your debts into a new loan with a single monthly payment.
Rather, debt settlement is designed to be a last resort before filing for bankruptcy, and comes with certain risks. Debt settlement negatively impacts your credit score, and if you can’t complete your debt settlement program, you could end up with bigger debts than when you started.
However, there are trustworthy, BBB-accredited debt relief companies that have relationships with creditors and can reduce your debt for a fee. Before you sign up, look into free options like non-profit credit counseling or try to work with your creditors yourself.
Accredited Debt Relief is a highly-rated company that offers debt settlement and debt consolidation loans. It claims it can reduce unsecured debts by about 50% with its debt settlement program. Like most debt relief programs, it charges fees between 15% and 25% of the enrolled debt balance.
The company works with all major creditors and lenders and advertises that you can be out of debt in as little as 12 months. It gets overwhelmingly positive reviews on sites like the Better Business Bureau (BBB), Trustpilot and Google reviews, and has relatively few BBB complaints.
Min. credit score
N/A
APR
N/A
Loan amount
Starting at $10,000
Not available in: Delaware, Hawaii, Kansas, Maine, Minnesota, New Hampshire, North Dakota, Oregon, Rhode Island
Accredited Debt Relief is a highly-rated company that offers debt settlement and debt consolidation loans. It claims it can reduce unsecured debts by about 50% with its debt settlement program. Like most debt relief programs, it charges fees between 15% and 25% of the enrolled debt balance.
The company works with all major creditors and lenders and advertises that you can be out of debt in as little as 12 months. It gets overwhelmingly positive reviews on sites like the Better Business Bureau (BBB), Trustpilot and Google reviews, and has relatively few BBB complaints.
Pros
Positive customer rating on the BBB site
Soft credit check to see your options
Works with private student loan debt
Cons
Pressure to prequalify over the phone
Costs, fees, program amounts and risks only disclosed after prequalifying
Unlike other debt relief companies, Freedom Debt Relief will work with debt starting at just $4,000 – but this is for programs beside debt settlement, like debt consolidation. For its debt settlement program, you'll need to enroll at least $7,500 worth of debt.
Freedom Debt Relief works with unsecured loans – and private student loans on a case-by-case basis. It may be able to reduce what you owe your creditors by around half, for a 15% to 25% fee. But as with all debt settlement programs, your credit score will take a hit while you're in the program.
Min. credit score
N/A
APR
N/A
Loan amount
Starting at $4,000
Not available in: Colorado, Hawaii, North Dakota, Oregon, Rhode Island, Vermont, Washington
Unlike other debt relief companies, Freedom Debt Relief will work with debt starting at just $4,000 – but this is for programs beside debt settlement, like debt consolidation. For its debt settlement program, you'll need to enroll at least $7,500 worth of debt.
Freedom Debt Relief works with unsecured loans – and private student loans on a case-by-case basis. It may be able to reduce what you owe your creditors by around half, for a 15% to 25% fee. But as with all debt settlement programs, your credit score will take a hit while you're in the program.
Pros
Be debt-free in as little as 12 months
Works with private student loan debt
Mostly good reviews online
Cons
Some loans come at a high cost
Loan amount
Starting at $4,000
APR
N/A
Interest Rate Type
Variable
Min. credit score
N/A
Turnaround Time
Varies by lender
Loan Term
2 to 4 years
Freedom Debt Relief Disclaimer Our estimates are based on prior results, which will vary depending on your specific enrolled creditors and your individual program terms. Not all clients are able to complete their program for various reasons, including their ability to save sufficient funds. We do not guarantee that your debts will be resolved for a specific amount or percentage or within a specific period of time. We do not assume your debts, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Our service is not available in all states and our fees may vary from state to state. Please contact a tax professional to discuss potential tax consequences of less than full balance debt resolution. Read and understand all program materials prior to enrollment. The use of debt settlement services will likely adversely affect your creditworthiness, may result in you being subject to collections or being sued by creditors or collectors and may increase the outstanding balances of your enrolled accounts due to the accrual of fees and interest. However, negotiated settlements we obtain on your behalf resolve the entire account, including all accrued fees and interest. C.P.D. Reg. No. T.S.12-03825.
National Debt Relief is a popular settlement company that works with the major credit card issuers and banks. Its fees are similar to other debt settlement companies, charging between 15% to 25% of the debt you enroll in the program, which must be a minimum of $10,000 – higher than some other companies.
And if you aren't happy with your experience, National Debt Relief offers a satisfaction guarantee, which means you can cancel without penalties or fees. But it gets mixed customer reviews, and has a higher number of BBB complaints compared to other debt relief companies.
Min. credit score
N/A
APR
N/A
Loan amount
Starting at $10,000
Not available in: Oregon, Vermont, West Virginia
National Debt Relief is a popular settlement company that works with the major credit card issuers and banks. Its fees are similar to other debt settlement companies, charging between 15% to 25% of the debt you enroll in the program, which must be a minimum of $10,000 – higher than some other companies.
And if you aren't happy with your experience, National Debt Relief offers a satisfaction guarantee, which means you can cancel without penalties or fees. But it gets mixed customer reviews, and has a higher number of BBB complaints compared to other debt relief companies.
Consolidated Credit is a non-profit credit counseling company that offers a debt management program with a reduced interest rate and a single monthly payment. Because it's not a debt settlement program, you don't stop paying your creditors.
The average turnaround is around two years and it offers discounts for military personnel and veterans. According to the company, its clients pay around $40 per month in fees, which is rolled into their program payments.
Min. credit score
APR
Varies by lender
Loan amount
Available in all states
Consolidated Credit is a non-profit credit counseling company that offers a debt management program with a reduced interest rate and a single monthly payment. Because it's not a debt settlement program, you don't stop paying your creditors.
The average turnaround is around two years and it offers discounts for military personnel and veterans. According to the company, its clients pay around $40 per month in fees, which is rolled into their program payments.
Pros
Reduced interest rates
Your credit is less affected because creditors continue to be paid
This debt settlement company charges competitive fees as low as 14% of the debt you enroll in its debt settlement program. While the company doesn't list a minimum consumer debt requirement to qualify, it states it works with private student loans starting at $5,000.
The company offers a plethora of information on its website and says that its clients take, on average, just over two years to complete its program. While New Era has fewer online customer reviews than some other debt relief companies, its reviews on Trustpilot and the BBB site are overwhelmingly positive.
Min. credit score
APR
Varies
Loan amount
Starting at $5,000
Not available in: Hawaii, Maine
This debt settlement company charges competitive fees as low as 14% of the debt you enroll in its debt settlement program. While the company doesn't list a minimum consumer debt requirement to qualify, it states it works with private student loans starting at $5,000.
The company offers a plethora of information on its website and says that its clients take, on average, just over two years to complete its program. While New Era has fewer online customer reviews than some other debt relief companies, its reviews on Trustpilot and the BBB site are overwhelmingly positive.
CuraDebt is one of a few debt settlement companies that offers tax relief. And while its 20% fee is on the high end, the savings might make up for it. It claims to have settled up to 100% of some of its clients' debts in the past. How? It goes after the legality of the debt, rather than just trying to negotiate it down.
It also offers programs for business debt relief and its services are available in all 50 states. But its customer service is lacking — we couldn't get a straight answer from customer service and there's not much information online. However, this is typical for most debt settlement companies.
Min. credit score
APR
Varies by lender
Loan amount
Starting at $5,000
Not available in: Colorado, Illinois, Washington, Wisconsin
CuraDebt is one of a few debt settlement companies that offers tax relief. And while its 20% fee is on the high end, the savings might make up for it. It claims to have settled up to 100% of some of its clients' debts in the past. How? It goes after the legality of the debt, rather than just trying to negotiate it down.
It also offers programs for business debt relief and its services are available in all 50 states. But its customer service is lacking — we couldn't get a straight answer from customer service and there's not much information online. However, this is typical for most debt settlement companies.
Finder’s lending experts analyze the rates, services and reputation of nearly 20 debt relief companies available on the market to narrow down our best picks.
We analyze and weigh such factors as fees, how long it typically takes to settle accounts and debt enrollment minimums. We also look at accreditation from trade organizations like the International Association of Professional Debt Arbitrators (IAPDA) and the American Fair Credit Council (AFCC), which set and maintain industry standards. Other factors we consider include the types of services offered and types of debts they accept, as well as any additional perks — like discounts for service members.
We update our best picks as debt relief products change, disappear or emerge in the market and to reflect the most competitive products available.
What is debt relief?
Debt relief refers to services designed to help you reduce or restructure your debt. The following types of programs typically fall under debt relief:
Debt settlement. Debt settlement is offered by accredited companies like National Debt Relief, who negotiate down your balance with creditors in exchange for a lump-sum payment. Debt settlement is the most common form of debt relief, but it impacts your credit score and comes with certain risks.
Debt consolidation. This option involves taking out a personal loan or balance transfer credit card with a lower rate to pay off your credit accounts. It’s more expensive than debt settlement, but it won’t hurt your credit score as long as you make your payments.
Credit counseling. With credit counseling, you meet with an expert to go over your budget, bills and credit account to find a way to manage your debt. It won’t lower what you owe, but it can give you the tools to tackle your finances.
Debt settlement is the most common type of debt relief out there — but also the most risky. That’s because you may have to stop making payments to your creditors to keep up with the monthly cost of the program. Stopping payments will damage your credit score, increase the amount you owe in interest and fees and put you at risk of being sued by your creditors.
Debt settlement is when an accredited, for-profit business negotiates with your creditors on your behalf to settle your debt for less than what you owe. Many debt relief companies claim they can reduce your debt by about 50%, with programs lasting 12 to 48 months. Fees run about 15% to 25% of the debt amount you enroll in the program.
When you enroll your debts with a debt relief company, you stop paying your creditors and send payments to the debt relief company instead. After 90 to 120 days, the debt relief company reaches out to your creditors to settle your debt, using the money in your account to negotiate. By law, you control these funds and can even withdraw from them at any time without a penalty.
However, debt settlement can be risky. Fees and interest accrue while your accounts go unpaid, and creditors are not legally obligated to accept the settlement. If things go awry, you could end up owing more than you bargained for.
Working with a reputable debt settlement company can help reduce the risk. At a minimum, make sure the company is accredited with the International Association of Professional Debt Arbitrators or the American Fair Credit Council, which set and maintain industry standards.
What to know about debt settlement fees
It’s illegal for debt relief services to charge you a fee before they’ve provided results. Most legit companies also won’t ask for fees all at once, preferring steady payments toward settlement accounts and services.
How much will I pay with debt settlement?
Debt relief companies usually charge a fee of 15% to 25% of the each credit account it settles. While it’s not free, it can ultimately offer savings compared to the amount you’d pay in interest on credit card accounts — or even a debt consolidation loan.
Here’s an example of how much you might pay if you use a debt relief program compared with a debt consolidation loan at 11.08% APR or minimum credit card payments toward $25,000 in debt at 23% APR.
$25,000 debt costs using debt relief vs. consolidation loan vs. payments
Debt relief
Debt consolidation loan at 11.08% APR
Making minimum payments only at 23% APR
Monthly payment
$408
$500
$700
Total repayment
$18,750
$33,595
$42,537
Debt free in
46 months
58 months
61 months
Interest rate
0%
11% APR
23% APR
In this example, debt relief costs $14,845 less than a debt consolidation loan and $23,787 less than making minimum monthly payments on a credit card. Even with fees.
Who is debt relief best for?
Debt relief is best for people who:
Owe at least $7,500 in debt
Have trouble making repayments on that debt
Want to avoid bankruptcy
Most companies accept only unsecured debt for debt relief. This includes credit cards, retail store cards, personal loans and medical bills. You generally can’t use debt relief to get rid of student loan debt, tax debt or secured debt like mortgages and car loans.
But there are exceptions. Some established debt relief companies can settle private – not federal – student loans and even some secured debt. National Debt Relief is one company that is willing to work with private student loans.
How to choose a debt relief company
Debt relief has earned itself a somewhat shady reputation, thanks to a rise in scam companies in the early 2000s. Although a 2010 federal crackdown cleaned up the industry in part, scammers are always creating new ways to take your money.
Avoid a scam by weighing these nine factors when deciding between debt relief companies:
Accreditation. Check a company’s IAPDA certification and AFCC accreditation. Many states require legit debt relief companies to be accredited — and many also require employees to receive IAPDA training and certification.
Minimums and debt type. Know the minimum amount of debt you need to qualify and the types of debt that are eligible. Many companies don’t work with student loans or secured debt.
Fees. Many companies charge between 15% and 20% of your total enrolled debt in fees. Keep in mind that it’s illegal to be charged fees until the company provides results.
Customer reviews. Read through reviews on sites like Trustpilot and the BBB, and avoid companies with a high number of complaints.
Transparency. Legitimate debt relief companies spell out what you can expect on their websites, with contracts in plain language so that you know what you’re signing. Never be pressured into agreeing to something you don’t understand.
Availability. Some states limit or outright ban debt relief services from providing services. Confirm that any debt relief company you’re interested in is licensed to operate in your state.
Length of time in business. It’s not failsafe, but older more-established businesses may feel less pressure to engage in unsavory business practices to stay afloat.
Solicitation. If the company solicited you for its services, make sure advertised promises are true. Otherwise, it’s not following government regulations.
Risks of debt relief: What to look out for
While offering a solution out of large debt, the process of debt relief isn’t without risks. Keep in mind these five drawbacks when weighing your options.
Your credit score may drop. Debt settlement can cause your credit score to dip by 100 points or more — at least until your debts are paid off. A record of your missed payments will stay on your credit report for seven years, which can affect your ability to get credit.
Your debt amount may go up. When you begin sending money to the debt relief company instead of your creditors, fees and interest will accrue on your accounts. If you don’t follow through with your debt settlement program, you’re responsible for these charges.
Your creditors could reject negotiation. If the creditor rejects the debt relief company’s settlement, you could end up owing more than originally planned. Creditors are not legally obligated to negotiate.
You will pay taxes on your settled debt. The IRS considers settled debt to be taxable income. Fees and interest that accumulate while you’re in the program can eat into what you save through the program.
Program completion takes work. Only around 10% of people who enroll in debt relief actually complete the program. Keep track of your progress to stay motivated toward your goal: paying off your debt.
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Alternatives to debt relief
Debt relief alternatives can take more effort to find and apply for, but they may provide a softer landing with less damage to your credit.
Debt consolidation loans
Debt consolidation involves taking out a personal loan to pay down debt. These loans are best for someone with a credit score above 670 who needs more than a year to pay it down, but owes less than 50% of their gross annual salary. Depending on your credit, consolidation may not necessarily get you a lower rate, but it can significantly cut down on the number of bills you need to pay every month.
Skip this option if you have bad credit, or a credit score below 580. Few lenders offer loans to bad credit borrowers. And unless you’re looking to pay off high-interest debt like payday or installment loans, you likely won’t qualify for a rate that makes it worth it.
DIY debt negotiation
Be your own advocate and negotiate down your balances or ask for stronger terms from your creditors. While you won’t have as much experience as a professional, you’ll avoid potential scams and know that you have your own best interests in mind.
Nonprofit credit counseling
Some credit counseling companies are free, because the Department of Justice requires it for those who enroll in credit counseling as a part of bankruptcy proceedings. For credit counseling or debt management, you might pay a monthly fee of around $35.
The federal government offers debt relief programs for federal loans and mortgages that can help slash or reduce your debts.
Making Home Affordable. A government mortgage assistance program that can help reduce the amount you owe. This program is also called HAMP, HAFA and HARP.
Federal student loan forgiveness. Forgiveness programs like Public Service Loan Forgiveness and Teacher Loan Forgiveness allow you to wipe out all or part of your debt in exchange for working in public service for several years.
Government grants. Low-income individuals might qualify for a government grant to cover costs — especially if you’re faced with unexpected expenses and debt.
Bankruptcy
This is an option of last resort. With bankruptcy, you can either declare bankruptcy yourself or use legal representation to help you navigate the bankruptcy process.
Answers to common questions about debt relief companies.
Can a debt relief company help me with loans I’ve defaulted on? Possibly. If you’ve recently defaulted on a personal loan, a debt relief company may be able to help you get out of default and begin making on-time payments again. If your loan is in collections, the company may be able to help you negotiate a settlement.
Should I try debt settlement or file for bankruptcy? It depends on your situation. If you’re able to settle your debts, it can have a less drastic impact on your credit score. However, if you fail to settle your debts and have to file for bankruptcy anyways, you could end up in worse shape than if you’d gone straight to bankruptcy. Read our guide on debt settlement versus bankruptcy to learn more about how to decide.
How long will a debt settlement stay on my credit report? Debt settlement will stay on your credit report for seven years from the date the debt was settled.
Anna Serio was a lead editor at Finder, specializing in consumer and business financing. A trusted lending expert and former certified commercial loan officer, Anna's written and edited more than 1,000 articles on Finder to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in publications like Business Insider, CNBC and Nasdaq, and has appeared on NBC and KADN. Anna holds an MA in Middle Eastern studies from the American University of Beirut and a BA in Creative Writing from Macaulay Honors College at Hunter College, CUNY. See full bio
Anna's expertise
Anna has written 154 Finder guides across topics including:
A review of TurboDebt, a debt settlement company that helps consumers resolve their debts for less than they owe, for 15% to 25% of your enrolled debts.
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We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
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