Debt Consolidation Companies

Companies that do debt consolidation have a variety of methods they use and it’s vital that consumers understand the differences in each plan.

Debt management, debt settlement, debt relief and debt negotiation are all bona fide plans for consolidating debt, but there are differences in the approach used to get a result. Each one has a distinguishing feature that makes it an appropriate – or inappropriate – solution for your problem.

It’s up to consumers to sort through the choices and determine which company meets the goal of eliminating debt. Some companies maintain in-house debt counseling to assist consumers. Others refer clients to a network of companies, credit counselors and debt attorneys that offer solutions.

Debt.org compiled information on six of the top debt consolidation companies in the United States and reviewed them based on services, fees, and reviews from the Better Business Bureau. The ratings, plus tips on how to choose a debt consolidation company, are below. The star rating below is based on Debt.org’s review of each organization’s fees, transparency, Better Business Bureau rating and complaint history.

InCharge Debt Solutions

4.7 Stars
(4.7 / 5)

Services Offered
Debt Management Plan
Free Budget Counseling

Minimum Debt
$1000

Time Frame for Solution
36-60 months

Interest Rate
N/A

Fees
Monthly fee up to $55 based on a percentage of your payment. Setup fee up to $75 varies by state.

Company Description
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.

Comments
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.

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Prosper Funding

4.4 Stars
(4.4 / 5)

Services Offered
Personal Loans

Fees
Origination fee 0.5%-4.95%. Late fee is 5% of monthly payment or $15. Failed payment is $15.

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Wells Fargo

4.2 Stars
(4.2 / 5)

Services Offered
Secured & Unsecured Personal Loans

Fees
Origination fee for secured loan is $75. Fee for late payment or insufficient funds is $39.

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Lending Club

4.0 Stars
(4.0 / 5)

Services Offered
Personal Loans

Fees
Origination fee 1%-6%. Late fee is 5% of monthly payment or $15. Check processing fee is $7.

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Avant

3.8 Stars
(3.8 / 5)

Services Offered
Personal Loans

Fees
Origination fee is $40. Late fee is $25. Fee for insufficient funds is $15.

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National Debt Relief

3.5 Stars
(3.5 / 5)

Services Offered
Debt Settlement

Fees
18%-25% of amount settled

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Customer Service Matters

Never underestimate the value of customer service in choosing the best debt consolidation company. Talking about debt problems is difficult. The ability to speak freely with a credit counselor can make you more comfortable taking suggestions to help your cause.

A good debt-relief company will 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. They should work to make your bills more manageable.

It helps to know how credit counselors are compensated. If they receive bonuses for selling additional services, that should be a red flag. A company should make you feel like it has your best interests at heart at all times.

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.

Under most circumstances, debt consolidation companies can’t help with mortgages, secured personal loans, or car loans.

An important part of their customer service is to educate you, not just on how to pay off the existing debt, but also to understand the root cause of your debt and how to avoid that in the future.

Look for Transparency

Many consumers, especially those seeking financial help, have been exploited by misleading, or blatantly false promises.

It’s a lot easier to deal with 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.

Being transparent about business practices helps build trust between the consumer and business.

Signs of Transparency Among Debt Consolidation Companies

The easiest place to gauge a company’s transparency is likely to be its website.

There is standard information that should be available on every debt consolidation company’s website that tells you whether it has anything to hide. Some of the basics include 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.

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.

Company 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!

If you are struggling to keep up with credit card debt or need help with bill consolidation, finding a company that has a track record of success, helps build confidence and trust.

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, which normally would be considered a positive, but the fact that nearly all of them have an A-plus rating from BBB waters down the rating.

The BBB does, however, list the number of complaints companies receive and how many of those complaints were resolved, which could be useful in making a final decision.

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

Payday loans seem like a handy go-to solution for people in emergency situations, 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.

Counseling and Education

One overlooked part of choosing a debt consolidation company is the educational aspect to it. Will the customer learn anything from the experience that can be useful in avoiding future problems?

Educating and counseling consumers is almost exclusively the province of the non-profit organizations involved in debt consolidation. Non-profits 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.

They review the information and should offer an impartial recommendation that could involve a debt management plan, debt settlement, or even bankruptcy if the situation calls for 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.

Which Debt Consolidation Company Is Best?

Choosing a debt consolidation company involves research and understanding of your situation.

The best solution happens when you know what resources are available to apply to the problem, the frame you have to solve it and then deciding which debt consolidation program works within those parameters.

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 debt settlement. However, if you’re trying to eliminate payday loans, a company that specializes in debt settlement might be your best choice.

How will you know the difference? That is where research comes in.

You should know the nuances and definitions for the various debt consolidation programs so that you don’t confuse one with another. 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.

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