Best Debt Consolidation Companies
Debt.org compiled information on six of the top debt consolidation companies in the United States and reviewed them based on services, fees, reviews from the Better Business Bureau and complaint history.
The review showed the diversity in how companies solved debt problems, the cost of doing so and length of time for completion.
InCharge Debt Solutions
(4.7 / 5)
Debt Management Plan
Free Budget Counseling
Monthly fee up to $55 based on a percentage of your payment. Setup fee up to $75 varies by state.
InCharge is a 501 (c)(3) nonprofit that specializes in credit counseling and debt management programs. Counselors are trained and certified by the National Foundation for Credit Counseling. Services are available online, via phone and in-person in Orlando, Florida.
Debt management programs are best suited for people with a steady income and willingness to overcome careless spending habits. They require commitment and patience. They don’t reduce the amount owed, but can help reduce the interest rate paid on debt. The company is well-known for budgeting and efforts to improve consumer’s financial literacy.
(4.2 / 5)
3-5 year loans
$2,000 to $35,000
Origination fee 0.5%-4.95%. Late fee is 5% of monthly payment or $15. Failed payment is $15.
5.99% to 35%, depending on qualifying factors.
Prosper is a for profit online lending service. Borrowers file financial information and are matched with investors who fund the loans. Prosper services the loans on behalf of both borrower and lender.
Prosper will appeal to consumers who have a good credit score, but need a quick decision on whether they’ll get a loan. Competitive interest rates and quick approval process make this an appealing choice. Fee structure may be an obstacle. Credit score must be 640 or better.
(4.2 / 5)
Secured & Unsecured Personal Loans
2-5 year loans
$3,000 to $250,000
Origination fee for secured loan is $75. Fee for late payment or insufficient funds is $39.
Wells Fargo & Company is a for profit bank and the third largest bank by assets in the U.S. and the largest by market capitalization. It offers secured and unsecured personal loans for debt consolidation.
If you want options, this is the place, but read the fine print closely. Good credit score and equity in home or car make a big difference in the interest rate they charge. It also helps if you do your banking with them.
(4 / 5)
3-5 year loans
$1,000 to $40,000
Origination fee 1%-6%. Late fee is 5% of monthly payment or $15. Check processing fee is $7.
5.99%-35%, depending on qualifying factors
Lending Club is a for profit leader in online lending. Borrowers fill out an application, the company assigns them a credit rating and interest rates and investors fund the loan. Lending Club services are available online.
If you’re in a hurry, Lending Club moves quickly. They provide a quick response on loan requests, but rates expire in 7 days, which means you better be ready with a decision. No telephone number on website makes customer service a problem.
(3.8 / 5)
2-5 year loans
$1,000 to $35,000
Origination fee is 0.95% – 3.75%. Late fee is $25. Fee for insufficient funds is $15.
9.95%-36% for loans
Avant is a for profit lending institution that claims 450,000 customers and more than $1 billion in loans in its first four years. Application process is quick and easy to understand. Apply for a loan by visiting the Avant website.
Good news is that borrowers with less than stellar credit score (under 600) could find help, but there are plenty of complaints that loan interest rates are too high.
How Debt Consolidation Works
Debt consolidation works by combining multiple bills into a single payment, then eliminating that with either a loan or a debt-relief program.
Debt consolidation is designed to simplify the bill paying process by making just one payment at a reduced interest rate. If done effectively, it should be more affordable and faster in wiping out debt.
What Kinds of Debt Can Be Consolidated?
- Credit cards
- Unsecured personal loans
- Payday loans
- Medical and hospital bills
- Department store credit cards
- Accounts in collections and certain utility bills.
Some companies will require that you have a minimum amount of unsecured debt, usually $7,500 or more. Under most circumstances, debt consolidation companies can’t help with mortgages, secured personal loans, or car loans.
The six companies on our list are solid, proven providers and should be able to assist you with any questions you have in your effort to eliminate debt.
Debt Consolidation Options
There are several ways to consolidate debt, depending on your financial situation and how disciplined you will be at sticking to a budget and making on-time payments every month.
The list of debt consolidation options includes:
- Debt management programs primarily administered by nonprofit credit counseling agencies
- Debt consolidation loans via personal loan; home equity loan; home equity line of credit; balance transfer credit card or 401k withdrawal
- Debt settlement
Benefits and Disadvantages to Debt Consolidation Programs
The primary benefit of debt consolidation is to simplify bill paying by having one monthly payment instead of four, five or maybe even 10 bills to pay.
Other pros in going with debt consolidation include:
- The interest rate for the one bill should be lower than the various rates charged by credit card companies.
- A lower interest rate should mean a lower monthly payment.
- An affordable monthly payment should mean paying off the debt faster.
- Making on-time payments will improve your credit score.
The disadvantages of consolidating debt are minimal – as long as you stick with the program. Some of the cons are:
- Paying off credit card debt could tempt you to start using them again. You should stop – or at least restrict – use of credit cards.
- There could be fees associated with debt consolidation loans that increase the cost of the loan.
- You must make payments on time every month or risk penalties.
- If you take a secured loan, it puts that asset at risk.
What to Look for in a Debt Consolidation Company
With debt consolidation, success largely depends on maintaining a good working relationship with your creditor and showing discipline in managing your money.
The first thing a good debt-relief company will do is put you at ease. Companies should provide you with clear answers, and have a reputation for integrity and success. Counselors should be trained and certified by a state or national organization.
It helps to know how credit counselors are compensated. If they receive bonuses for selling additional services, that should be a red flag.
Good customer service should also educate you about the root cause of your problems with debt and train you how to avoid making those mistakes.
Choose a debt consolidation company that is transparent about its practices, discloses all terms and conditions involved in doing business and freely provides information to verify whatever claims or guarantees it makes to customers.
The easiest place to gauge a company’s transparency is likely to be its website.
There is standard information that should be on every company’s website:
- Are they stable – How long the company has been in business?
- Who are they – Is there a page that lists its top executives, the company’s physical address, hours of operation and phone number?
- Choice of programs – Do they offer loans or is the focus on credit counseling and programs like debt management plans or debt settlement?
- Cost and fees – Do they list all the fees (origination fee, monthly fee, late payment fee) associated with loans or programs? If they offer debt consolidation loans, what are the interest rates?
- Program time frame – How long should it take to pay off the debt? If you receive a loan, is there a pre-payment penalty?
- Eligibility – Is there a minimum or maximum amount of debt to qualify? Is there a minimum credit score required? Is this only for personal debts or does it include small business debts?
- Customer service – Will you get a personal counselor assigned to you? Can you interact with them online or with a smartphone? Is there a page for objective reviews of the company’s performance?
When a company has nothing to hide, it should have no problem putting all that information up on its site to help consumers understand what is involved in finding solutions to their credit problems.
Longevity and Trustworthiness
Companies that have been around 10–15 years develop a level of trust with customers. Their beliefs, values and performance remain consistent. Providing customers with solutions is why they are still in business.
Most of the companies involved in debt consolidation are accredited by the Better Business Bureau and have A-plus ratings. The BBB is often generous with its ratings, but it’s still a useful resource. It lists the number of complaints companies receive and how many of those complaints were resolved, which could be useful in making a final decision.
Counseling and Education
An overlooked but vital part of choosing a debt consolidation company is the educational aspect to it. Will you learn anything from the experience that can be useful in avoiding future problems?
Educating and counseling consumers is almost exclusively the province of the nonprofit organizations involved in debt consolidation. Nonprofits are required by the Internal Revenue Service to provide an educational aspect to their service in order to retain their tax-exempt status as 501(c)(3) organizations.
Nonprofits do this by offering credit counseling, almost always at no cost. Counselors review a consumer’s finances, focusing on the circumstances that caused financial problems and how managing budgets will solve it.
If you choose this route, be sure the company’s counselors are trained and certified. Contact the National Federation for Credit Counseling (NFCC) if you have questions about certification.
Avoiding Debt Consolidation Scams
The debt-relief business is no stranger to scams. There are warning signs that should alert consumers to be careful whom they trust to solve their financial problems, but some companies still succeed.
Some of the things to watch for when choosing a company include:
- Claiming nonprofit status when they’re actually a for-profit business.
- Offering guarantees to settle your debt for pennies on the dollar.
- Seeking fees for services before reaching a written agreement with your creditors.
- Using aggressive sales pitches, asking you to act quickly on a decision that requires research and time.
- Promising a “quick fix” solution. All debt relief programs take time, most of them between three and five years. Be suspicious of promises that it can happen faster.
How to Choose a Debt Consolidation Company
Choosing a debt consolidation company can be a difficult process, but you can ease the strain of making the right decision by following this process:
Step 1: Do Your Research
Apply the information you gathered to the financial situation you’re facing and be sure it solves the problems.
Step 2: Assess Your Strengths
For example, if you have enough income to pay down debt, but just need to be more disciplined, a debt management program might be a better choice than a debt consolidation loan or debt settlement.
Step 3: Know Your Weakness
If you’ve let the amount of debt become overwhelming – to the point where you’ve even tried payday loans! – then debt settlement might be your best consolidation choice..
Step 4. Make a Careful, Considered Choice
It’s important to find a company that offers the type of debt consolidation program you want, makes you feel comfortable dealing with their staff and their requirements, and one that educates you while you’re in the program so you never have to return.
Step 5: Be Realistic about a Timetable
Debt consolidation programs are designed to erase debt in 3-to-5 years. It’s possible it could go faster, but only if you’re able to direct more of your income at debt. You likely didn’t get into debt in a hurry. It’s not likely you’ll get out in a hurry. Don’t be focused on the time. Focus on making good spending choices and on-time debt payments.
This isn’t easy. Don’t be afraid to reach out for help when you’re deciding which path is best for you. All nonprofits offer free, no-strings-attached counseling.
Once you’ve made your decision, realize even the best debt consolidation company can only give you the tools to get out of debt. It’s up to you do to the hard work.
But with the help of a debt consolidation company, all that digging will be worth it.
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