Find the Best Debt Consolidation Company

    If you’re in debt and want a way out, there are plenty of companies willing to help you by consolidating your debt.

    So, which is the best debt consolidation company?

    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.

    Whichever you choose, the end result is usually worth it. A 2018 survey by U.S. News showed that debt consolidation lowered monthly payments, improved the credit score or eliminated debt for 62.3% of respondents and 68.1% improved their spending habits.

    InCharge Debt Solutions

    Star Rating 4.7 (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. Services are available online, via phone and in-person in Orlando, Florida.

    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.

    BBB Accredited: Yes

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    Prosper Funding

    Star Rating 4.4 (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

    Star Rating 4.2 (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

    Star Rating 4.0 (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

    Star Rating 3.8 (3.8 / 5)

    Services Offered
    Personal Loans

    Fees
    Origination fee is 0.95% – 3.75%. Late fee is $25. Fee for insufficient funds is $15.

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    National Debt Relief

    Star Rating 3-5 (3.5 / 5)

    Services Offered
    Debt Settlement

    Fees
    18%-25% of amount settled

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    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.

    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.

    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:

    Customer Service

    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.

    Transparency

    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.

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