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.
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 program requires commitment and patience. Won’t reduce amount owed, but can help reduce interest rate paid on debt. Excellent at helping develop a budget. The company is well-known for efforts to improve consumer’s financial literacy.
(4.4 / 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. Services are provided online and over the phone.
Competitive interest rates and quick approval process make this an appealing choice. Fee structure may be an obstacle. Process eventually will include hard inquiry on credit score, which must be 640 or better. That could eliminate some borrowers.
(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. Services are available nationwide at Wells Fargo’s 6,000 retail banks, and also via telephone.
A lot of options for debt consolidation loans, but rules associated with each option can be confusing. Good credit score and equity in home or car make a big difference in interest rate charged for loans. 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, then company assigns credit rating and interest rates. Investors fund the loan. Lending Club services are available online, through their website.
Company offers quick response on loan requests, but rates expire in 7 days, which means you better be ready with a decision. Credit score of 660 needed. No telephone number on website a problem for customers wanting service.
(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 opened in 2012 and claims 450,000 customers and more than $1 billion in loans in its first four years. Application process is quick and easy to understand. You can apply for a loan by visiting the Avant website. In-person service is not available
Good news is that borrowers with less than stellar credit score (under 700) could find help, but plenty of complaints that loan interest rates are too high.
National Debt Relief
(3.5 / 5)
24-36 months for settlement
18%-25% of amount settled
National Debt Relief is a for profit company specializing in debt negotiation and debt settlement. Their method of debt consolidation is to take all past due bills and attempt to reach a settlement with each creditor. Services are available over the phone only.
Debt settlement does severe, long-term damage to your credit score, a fact the company admits on its website. Some creditors won’t deal with debt settlement companies, but if you’re not worried about your credit score, this might be an appropriate option.
Debt Consolidation Programs vs. Debt Consolidation Loans
These two are similar in the primary method used to solve credit card debt. They both aim to lower your interest rate and monthly payment over a 3-5 year payoff plan.
However, there are some significant differences in the two that are worth investigating:
- Debt consolidation programs are not a loan so your credit score doesn’t matter.
- Debt consolidation programs include a monthly fee that loans do not.
- Consumers with severe credit card debt likely would get a better interest rate from a debt consolidation program that on a debt consolidation loan.
- The penalty for stopping payments on a debt consolidation program is that the concessions on interest rates go away. That may not happen if the consumer continues making payments directly to the credit card company.
- The penalty for stopping payments on a consolidation loan is further damage to your credit score and probable contact with a debt collection agency.
In summary, it’s best to compare the total amount spent on monthly payments and pay off time for both programs before deciding which is a better solution.
Benefits and Disadvantages to Debt Consolidation Programs
The primary benefit of debt consolidation programs is having your debts rolled into one monthly statement instead of having four or five or maybe even 10 bills to deal with.
The interest rate on that one bill is lower than the various rates you were paying, which means you should have a lower overall payment.
A lower payment means you should be able to pay off your debt faster. Paying your bills on time will improve your credit score.
The disadvantages of consolidating debt are minimal – as long as you stick with the program. That means stop using credit cards, which are a source of great temptation.
If creditors waived penalties and reduced interest when you consolidated your debt, they could cancel those changes if you don’t keep up with your payments. You could end up in worse shape than you began.
What Kinds of Debt Can Be Consolidated?
Most debt-relief companies can help you settle your unsecured debts, including credit card bills, 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.
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.
What to Look for in a Debt Consolidation Company
With debt consolidation, success largely depends on maintaining a good working relationship. That begins with one thing:
The first thing a good debt-relief company will do is put you at ease. Consumer debt hit $14 trillion in the first quarter of 2019, the highest since the economic meltdown of 2008, so being overwhelmed by bills is not uncommon, and you should speak freely. In return, 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 do more than help you pay off the existing debt. It should also educate you about the root cause of your debt and train you how to avoid making those mistakes.
Struggling with debt is stressful, and stress makes people more likely to fall for misleading promises. 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 — how long the company has been in business, a page that lists its top executives, the company’s physical address, hours of operation and phone number – that should be available on every company’s website.
If that information is easily available, you’re off to a good start. Other indications of transparency include:
- 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
In a marketplace where change occurs seemingly overnight, does longevity and trustworthiness really matter anymore? When it comes to your money, absolutely!
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.
Non-profits deal with this requirement by offering credit counseling, almost always at no cost. Counselors review a consumer’s finances, focusing mostly on the circumstances that caused financial problems and how managing budgets 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.
FTC Rules & Regulations for Debt Consolidation
The Federal Trade Commission (FTC) has enacted a strict set of rules governing for-profit companies operating in the debt-relief business. It’s called the Telemarketing Sales Rule (TSR) and most of it is meant to protect consumers from unscrupulous companies that offer debt consolidation.
While there are many aspects to the TSR, the most prominent provisions are:
- Don’t Pay Fees Up Front – Companies can’t collect a fee for their service until they have settled or resolved the customer’s debts. The customer and creditor must agree to the settlement in writing and the customer must make at least one payment to the creditor before the debt-relief company can collect a fee. If the customer has multiple debts, the company may collect a fee for each debt settled, but no fees can be collected in advance of a settlement.
- Know What You’re Getting in Advance – A debt-relief company should tell customers how long it will take to get results; how much it will cost for the service; and what the negative aspects of using debt relief service will be.
- Misrepresenting Services – Companies are prohibited from making false or unsubstantiated claims about their services, including how much it costs and what percentage of customers have gotten results you seek.
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 non-profit 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 before deciding
- 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.
Payday Loan Consolidation
May the buyer beware!
Payday loans seem like a good solution in an emergency, but they often are the start of a downhill slide that would be better treated with debt consolidation.
A study by the Consumer Financial Protection Bureau (CFPB) shows that 80% of payday loans get rolled over within two weeks, meaning the principle and interest — usually 300% APR or higher — haven’t been paid. The amount owed grows and the consumer falls deeper into debt. In fact, CFPB research shows that 50% of payday loans get rolled over as many as 10 times.
A better solution would be to contact a payday debt consolidation company and roll the various loans into one payment. Payday loan relief companies focus on people in severe financial trouble. The interest rate they charge is considerable, but it is nowhere near the average 391% APR attached to payday loans.
Payday loan debt consolidation companies also might help you get into a debt management program where you pay off the amount over an extended period of time.
Another form of payday loan consolidation is using a credit card to get a cash advance that would be used to retire the payday loan.
How to Choose a Debt Consolidation Company
Do your research and apply that information to your financial situation.
For example, if you have enough money but just need more time to pay off a debt, a debt management program might be a better choice than a debt consolidation loan or debt settlement. However, if you’re trying to eliminate payday loans, a company that specializes in debt settlement might be your best 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.
It can be confusing, so don’t be afraid to reach out of 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.
- Decambre, M. (2019, June 25). U.S. consumer debt is now above levels hit during the 2008 financial crisis. Retrieved from: https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19
- NA. (2017, March 9) Families’ Financial Security. An examination of gains, losses, and household economic experiences. Retrieved from https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2017/03/how-income-volatility-interacts-with-american-families-financial-security
- Bushey, C. (2017, November 11) Script to ask for a lower credit card rate. Retrieved from https://www.creditcards.com/credit-card-news/script-negotiate-better-credit-card-deal-1267.php
- Eriksen, K. (2018, March 22) Gif Economy Jobs: The Ultimate List. Retrieved from https://www.deputy.com/us/blog/gig-economy-jobs-the-ultimate-list
- Grant, K. (2015, April 2) Financial Literacy: Not just a problem for students. Retrieved from http://www.cnbc.com/2015/04/02/financial-literacy-not-just-a-problem-for-students.html
- NA, ND. Credit and Debt Counseling. Retrieved from https://www.nfcc.org/our-services/credit-debt-counseling/
- Singletary, M. (2011, June 16) Debt Consolidation Companies: 6 Red Flags. Retrieved from http://www.pbs.org/wnet/tavissmiley/a-wealth-of-knowledge/debt-consolidation-companies-6-red-flags/
- NA (2010, July) Debt Relief Services & the Telemarketing Sales Rule: A Guide for Business. Retrieved from https://www.ftc.gov/tips-advice/business-center/guidance/debt-relief-services-telemarketing-sales-rule-guide-business
- Shannon. (2012, April 25) How To Find A Reputable Debt Consolidation Company. Retrieved from http://blog.readyforzero.com/how-to-find-a-reputable-debt-consolidation-company/#.V0W69Pkwjbh
- Friedberg, B. (ND). Compare Reviews for Debt Consolidation Companies. Retrieved from https://www.consumeraffairs.com/debt_counsel/
- Facts for Consumers. Knee Deep in Debt. Federal Trade Commission. Retrieved from: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm
- “Money 911” by Jean Chatzky. Published by HarperCollins, New York, NY. © 2010 by Samuel Bennett, Inc. ISBN – 978-0-06-179869-6.
- “Managing Debt for Dummies” by John Ventura & Mary Reed. Published by Wiley Publishing, Inc., Hoboken, N.J. © 2007. ISBN – 978-0-470-08486-1.
- “The Complete Idiot’s Guide to Getting Out of Debt” by Ken Clark. Published by the Penguin Group. © 2009 by Ken Clark, CFP. ISBN – 978-1-592257-847-4.