Debt Management
If you’re looking for debt relief, you have several options, including debt settlement, debt consolidation, debt management plans, and credit counseling services. Costs, fees, company reputation, availability, and other factors are important to consider.
Best Debt Relief Companies for 2024
Investopedia’s experts put 40 companies through a rigorous evaluation process to identify the best debt relief companies for you. We collected over 2,000 data points and used our subject matter expertise to develop a process for finding the best debt relief companies and services, focusing on costs, fees, reputation, customer experience, and more.
Winners
- Best Overall for Debt Settlement, Best for Credit Card Debt, Best for Low Fees: National Debt Relief
- Best for Tax Debt Relief: CuraDebt
- Best for Customer Service: Accredited Debt Relief
- Best for Customer Satisfaction and Reputation: New Era Debt Solutions
- Also Great for Customer Satisfaction and Reputation: Freedom Debt Relief
- Best for Small Debts: Money Management International
- Also Great for Low Fees: Pacific Debt Relief
- Best for Credit Counseling: Apprisen
Guide to Debt Relief
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First, make a budget. Once you know where your money is going each month, identify extra money that you can allocate toward your debt. Next, try the debt avalanche or debt snowball method for paying off your debt. A debt consolidation loan may also be right for you, but you’ll need to qualify. If you have overwhelming debt, you may want to consider credit counseling or debt settlement services, or file for bankruptcy.
Learn More How to Get Out of Debt in 8 Steps -
Though it may seem counterintuitive, settling debt often has a negative impact on credit scores. Credit scores are designed to reward accounts that have been paid on time and according to the original credit agreement. A debt settlement plan modifies or negates the original agreement, which causes credit scores to drop. Debt settlement usually requires you to default on your credit accounts as well, which can have severe negative consequences for your credit.
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Debts with the highest interest rates, like credit cards, should usually be paid off first. Paying this debt first will help you pay less overall. Paying off credit cards will reduce your revolving credit utilization, which can improve your credit scores. Debts with lower interest rates and tax-deductible interest, like student loans or mortgages, should be paid on time every month, but paying them off in full is not as high of a priority.
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Some downsides to debt relief include impacts to your credit score, additional fees and costs, or a higher revolving credit utilization. Debt settlement and bankruptcy can negatively impact your credit. They can also be costly, although the forgiven debt helps make up for that. Debt management plans through credit counseling services have potential indirect effects—you’ll typically have to close any credit card accounts in the plan, which can lower credit scores. Debt consolidation loans come with interest rates and potential origination fees.
Learn More What You Should Know About Debt Relief -
Not all debt relief methods have required qualifications. According to Investopedia research, debt settlement companies often require clients to have $7,500 to $10,000 of debt to begin a program. Credit counseling services (and debt management plans) don’t often have debt requirements. You’ll need to meet credit and income requirements (in most cases) to get a personal loan for debt consolidation or refinancing. Different types of bankruptcy have different debt and income qualifications, among other requirements. And debt payoff apps usually have no qualifications.
Learn More How to Get Debt Relief in 2024
Key Terms
- Debt Relief Program
A debt relief program is a method for managing and paying off debt. It typically involves hiring a debt relief company to employ one or more strategies that help you get debt under control, such as by reducing the amount you owe, lowering your interest rate, or securing better terms.
- Credit Counseling
Credit counseling provides consumers who may feel overburdened by debt with guidance on consumer credit, money management, debt management, and budgeting. The goal of most credit counseling is to help a debtor avoid bankruptcy if they find themselves struggling with debt repayment. Many counseling services will negotiate with creditors on the borrower’s behalf to reduce credit card and loan interest rates and waive late fees.
- Debt Management Plan
A debt management plan is a tailored strategy to help you repay outstanding debt and financial obligations without using a new loan. Typically, credit counseling agencies work with creditors on your behalf to determine a debt management plan that fits your financial circumstances.
- Bankruptcy
Bankruptcy is a legal proceeding initiated when a person or business is unable to repay outstanding debts or obligations. The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor's assets are measured and evaluated, and the assets may be used to repay a portion of the outstanding debt.
- Debt Consolidation
Debt consolidation refers to taking out a new loan or credit card to pay off other existing loans or credit cards. By combining multiple debts into a single, larger loan, you may also be able to obtain more favorable payoff terms, such as a lower interest rate, lower monthly payments, or both.
- Debt Collection Agency
A debt collection agency is a company that plays a role between collecting customers’ delinquent debts—debts that are at least 60 days past due—and remitting them to the original creditor. Debt collectors often work for debt collection agencies, though some operate independently. Some are also attorneys.
- Debt Discharge
Debt discharge is the cancellation of a debt due to bankruptcy. When a debt is discharged, the debtor is no longer liable for the debt and the lender is no longer allowed to make attempts to collect the debt. Debt discharge can result in taxable income to the debtor unless certain IRS conditions are met.
- Debt Avalanche
A debt avalanche is a type of debt repayment plan where you first make the minimum payment on each source of debt, then devote any remaining repayment funds to the debt with the highest interest rate. Once the debt with the highest interest rate is paid off, any extra money goes toward the next-highest interest-bearing debt. This continues until all debts are paid off.
- Debt Snowball
The debt snowball method is a type of debt repayment plan where you first focus on paying down your smallest debt, while paying the minimum on all others. Once the smallest debt is paid off, you move on to devoting extra funds to the next smallest debt, until all debts are paid off.
- Debt Settlement
Debt settlement companies work with your creditors to bargain your current debt down to a level that you can afford, but they charge fees to handle the negotiations on your behalf. While you may owe less to your creditors, those fees can eat into your relief.