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With over 65% of Americans facing some form of debt over the course of their adult lives, that means millions of Americans are struggling with debt at any given time. The most common form of debt is mortgage debt. With over $14 trillion in debt outstanding, mortgage debt is the key driver in the nation’s accumulated debt. A distant second with $1.5 trillion is national student loans, a form of debt which can take individuals upwards of 20 years to pay off in full. Other types of debt, such as credit card debt, are often lower in sums but have an equally devastating effect if not repaid on time.
Whatever the debt sum or reason behind it, if you’re struggling to make your monthly payments, seeking debt relief may be the solution you need. This is a major financial decision that involves organization, commitment, and persistence to make it financially worthwhile. Before you dive into debt relief of any form, it’s imperative that you understand the terms and inner workings of how this industry works. Here’s a quick rundown to get you started.
Debt relief is a broad term that includes any number of devices that will allow you to minimize, consolidate, or relieve yourself of the financial burden of debt. Debt relief works by applying one of 5 basic strategies:
1. Debt Consolidation: Debt consolidation involves taking a consolidation loan with a fixed term and a fixed interest rate, so you know exactly when you will be free from debt.
2. Balance Transfer: Another option is to apply for a balance transfer. Mostly used in cases of high-interest credit card debts, this type of debt relief transfers high-interest credit card debts over to a new account with a 0% balance transfer rate. The new account will (presumably) have a lower interest rate, making it more manageable than the high rates charged by the credit card companies.
3. Renegotiating Terms: Depending on your circumstances, some people who find themselves in debt can attempt to sit with their debtors and come up with a debt management plan. The goal of this plan is to renegotiate the terms of your loan, including its interest rate, duration, and even the loan amount to be returned. Some lending establishments are flexible and willing to work with borrowers if they see you are responsible with finances in general but have fallen on hard times, for example an unexpected shift in the industry or being laid off from your job.
4. Debt Settlement: Others suffering from debt will try out a debt settlement service. These companies take the entire bulk of your current debt and give the creditors a lump-sum payment to settle your debts for less than you owe (also known as Debt Forgiveness).
5. Filing for Bankruptcy: Finally, and as a last resort, someone who has exhausted all other options may be advised by a financial expert to file for bankruptcy. Note that this is not a recommended option as it will adversely damage your credit and may not be removed from your credit history for up to 10 years from filing. In some cases, however, bankruptcy may be the only choice.
Understanding your options is the 1st step towards financial freedom. Next, you need to know a little bit more about debt: the good, the bad, and the ugly.
The fact that not all of your debt is bad for your credit is a fact that may surprise you. For example, while student loans and mortgage debts are generally deemed an "investment" in one's future and therefore good causes of debt, other forms of debt such as credit card debt or medical bills are regarded as bad types of debt.
The idea of good debt versus bad debt speaks to the purpose of the loan taken. Loans taken for educational purposes or for the purpose of owning a family home or other forms of dividend-reprising property are expected to yield financial fruit with which one is thought to pay off said loan.
Bad debt is generally looked at by creditors or debt relief/debt settlement providers in a negative way. Frequently – though not always – credit card debt is often associated with overspending and living beyond your means. This type of debt is viewed as irresponsible spending behavior and is a sign to creditors that you cannot be relied upon to pay off your loan/debt in the future. Often grouped into this form of debt are loans taken for travel, car purchases or upgrades, home improvements, and weddings, though certainly not to the same extent as credit card spending.
On the other side of the spectrum are medical loans taken due to unexpected circumstances and because of real necessity. While both forms of bad debt constitute a problem and an unfavorable circumstance, they are understandably looked at differently by creditors and relief companies.
The only responsible way to free oneself of debt is to arrange for a debt management plan. While in some cases debt management can be done on your own, in most cases you will require outside help in order to reach the goal of true debt relief. The better debt management companies will provide borrowers with a debt consultant who will sit with them privately, discuss their situation and options, and help guide them towards the best solution.
Generally, debt management services will do one of two things, though often times they will combine both strategies. Services can either assist you in negotiating a consolidation and refinancing plan with your creditor, or they can appeal for a debt settlement – which may or may not include some form of debt relief – on your behalf.
Whether you intend to attempt to relieve your own debt or to turn to a debt relief company for assistance, here are the key questions you need to answer:
• What is your total debt amount?
• How many creditors/lenders comprise your debt?
• What are your current monthly returns?
• What is your current income to repayment ratio?
• What is your income forecast for the next 15-20 years?
• How much are you paying in interest rates?
While debt relief is an attainable goal when done with the help of trained experts, it can be a pipe dream and a disastrous experience when attempted with mock counseling agencies who promise debt relief but have neither the means nor the experience to get you there. As with all things internet, reputation and a brand name play a key role in finding a debt relief service that will get the job done.
Keep your eyes open for so-called debt relief services that offer deals that sound too good to be true. All debt relief companies on our chart have a good rating with the Better Business Bureau (BBB). Look for signs of consumer satisfaction. Check for signs of unlawful activity. Do your homework before you settle on a company. Make sure you know who you’re dealing with and then give over the power of relieving you of debt to someone else.
If you’ve come this far, you’re serious about taking care of your debt, and you’ve decided that debt consolidation is the best choice for you. Now the next question is which service is right for your needs and circumstances. There are hundreds of options available, but you need to be careful, or you might land in worse debt than when you started out. Looking out for the telltale signs of quality versus scams is a great start towards debt relief, and here are a few top names in the industry to help you get started:
Accredited Debt Relief has been around for a while, which gives borrowers the confidence that this is a reliable lender. In fact, Accredited Debt Relief is a highly accredited debt settlement company with accreditations from both the AFCC and IAPDA. Additionally, a quick glance around the internet will reveal the positive standing that ADR has within the industry based on customer reviews and comments. While the service is not available in all 50 states, Accredited Debt Relief is a great option if:
• You have more than $7,500 worth of debt
• You’re looking for low-interest rates and fees
• You enjoy online services that make the borrowing process fast and hands-on
Here is a bit more about Accredited Debt Relief to help you make a more informed decision.
ClearOne Advantage is another big name in the debt relief industry, and for good reason. It is one of the only debt settlement companies to offer a complete 100% service guarantee within the first 90 days of enrollment. Customers who are unhappy with their ClearOne Advantage service can get out of their contract, and what’s even more impressive, ClearOne Advantage offers borrowers a guarantee to save money on their first settlement or be refunded all fees paid.
ClearOne Advantage deals with major debt, starting from $10,000, so it really know what it’s doing. Additionally, customers like this company because:
• It is highly accredited nationally
• ClearOne Advantage only takes payment once your debt settlement has been successfully arranged
• It has loads of educational resources for first-time borrowers who don't know much about the industry
Like what you’re reading? Then check out what else ClearOne Advantage has to offer.
Freedom Debt Relief has received an outstanding score from our reviewers, making it an obvious choice for those struggling with debt. Having resolved more than $4 billion worth of debt through settlements over the past 15 years, Freedom Debt Relief is a massive organization with tremendous business and financial experience behind it. As with ClearOne Advantage, Freedom Debt Relief offers a
money back guarantee, charges no upfront fees, and no payments are made until all debts are settled. So borrowers can really take advantage of this service without fear of repercussions later on. Freedom Debt Relief is an excellent choice for clients looking to:
• Relieve debt in under 4 years
• Work exclusively with one debt settlement consultant throughout the entire settlement process
• Take care of debt ranging from $7,500-$15,000 and beyond
Learn more about what Freedom Debt Relief can do for your financial difficulties now.
These are just a few of the options you can work with. For more in-depth overviews, check out all of our debt consolidation reviews from unbiased and thorough analysts.
Now that you have more experience with the industry and understand which features to look out for, you'll be able to make a more educated decision when choosing your own debt settlement company. Consider your particular circumstances including the questions we outlined above and:
• How long you want to spend paying out your debt
• What your credit history and score look like
• How knowledgeable you are with debt
• How interactive you want your service to be
Answering these questions will allow you to hone in on the best service for you. Once you know what you prefer, you can select the debt consolidator that has the most benefits and features that work for you.
Debt consolidation is a complex procedure, but you don’t have to weather the storm alone. Read our thorough reviews, browse through our helpful articles, and begin to get a better picture of what refinancing is all about.