If you're struggling to pay off debt, you can lower your payments either through debt consolidation or by enlisting the help of a debt relief or debt settlement company.
Unlike debt consolidation, which merges multiple balances into one loan (ideally with a lower interest rate), debt relief companies help clients pay off their debt by negotiating down the amount owed. During the negotiation process, clients stop making payments and save for debt payoff in a savings account. When an agreement with creditors has been reached, the debt is settled with the funds from that account.
Debt settlement isn't guaranteed and comes with some potential risks, such as losing points on your credit score, paying extra fees, being responsible for additional taxes when debts are settled and facing possible lawsuits. Nevertheless, for some people, debt settlement is still the right move.
Below, CNBC Select rounds up the top debt relief companies based on fees, customer satisfaction ratings, company history and availability. (Read more about our methodology below.)
Best debt relief companies
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Best overall
New Era Debt Solutions
Cost
14% to 23% of enrolled original debt
Highlights
New Era Debt Solutions has slightly lower fees than some of the other debt relief services we rated. It's been in business for 23 years, and is rated 4.93 out of 5 for customer satisfaction through the Better Business Bureau.
App available
No
Pros
- Accessible for Spanish speakers
Cons
- Not available in all states
New Era Debt Solutions stands out in several of the categories we considered. The company has been in business for over 20 years, ranks high for customer satisfaction, has an A+ rating from the Better Business Bureau and charges slightly lower fees than some of its competitors.
Best for large debts
National Debt Relief
Cost
15% to 25% of enrolled debt
Highlights
National Debt Relief has been in business since 2009, and has helped hundreds of thousands of people get out of debt. While National Debt Relief won't be a fit for people who owe less than $10,000, it can be a good option for those with large debts.
App available
No
Pros
- A+ Better Business Bureau rating
Cons
- A minimum of $10,000 of unsecured debt is required to enroll
- Not available in all states
National Debt Relief works with customers with $10,000 or more in unsecured debt, making it a good choice for people with large debts. This company charges a fairly typical fee for its service among the companies we compared. Clients can easily track their monitor their progress through a dashboard on the company's website.
Best for credit card debt
Freedom Debt Relief
Cost
15% to 25% of enrolled debt
Highlights
Freedom Debt Relief has been helping people get out of debt since 2002, and has resolved $15 billion of debt. Specializing in credit card debt, Freedom Debt Relief can help clients get started without fees up front and offers free credit card debt relief consultations.
App available
No
Pros
- A+ Better Business Bureau rating
Cons
- Not available in all states
Freedom Debt Relief can help clients get out of credit card debt, though it also deals with other types of unsecured debt like medical bills. A standout feature of Freedom Debt Relief is its program guarantee, which can refund fees if settlement and fees are greater than the amount originally owed when enrolling in the program.
Best for tax debt
Curadebt
Cost
Not disclosed
Highlights
While some debt relief companies won't work with tax debt, Curadebt will. Their tax debt services are available in all states except Pennsylvania, and has a 4.81 out of 5-star rating for customer satisfaction with the Better Business Bureau.
App available
No
Pros
- In business since 2000
- Works with state and federal tax professionals
Cons
- Not Better Business Bureau accredited
- Fees for tax debt relief are not disclosed online
CuraDebt is one of the few debt relief options that deal with IRS debt and back taxes. It offers services for state and federal tax debts and has CPAs and tax attorneys at hand to assist customers.
Best for customer satisfaction
Pacific Debt Relief
Cost
15% to 25% of enrolled debt
Highlights
Pacific Debt Relief is highly rated for customer service, earning a 4.93 out of 5 according to the Better Business Bureau. Since 2002, the company has settled over $300,000,000 worth of debt.
App available
No
Pros
- Highly rated for customer satisfaction
- Accessible for Spanish speakers
Cons
- Only operates in 37 states.
- High $10,000 minimum of unsecured debt for debt relief.
Pacific Debt Relief has the highest customer satisfaction rating through the Better Business Bureau among the companies we considered, scoring 4.93 out of 5. Additionally, it is BBB accredited and has been in business since 2002. However, it generally requires $10,000 or more in unsecured debt to qualify for the program.
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How to choose a debt relief company
Before choosing a debt relief company, you'll want to make sure that you've tried all other options. You might want to consider a non-profit credit counseling service as an alternative, which can help you make a plan to get out of debt.
The Consumer Financial Protection Bureau (CFPB) also recommends contacting your state Attorney General or any local consumer protection agencies to make sure there aren't any consumer complaints on file about the company. The office can also tell you whether the company you're considering is licensed in your state if it's required.
You'll want to beware of companies that:
- Charge fees before settling debt
- Makes guarantees on debt settlement
- Tells you to stop communicating with creditors
To find a good debt relief company, you'll want to consider the fees involved and make sure that they cover the type of debt you're working with. Then, consider reviews and current customer satisfaction.
Debt relief vs. debt consolidation
Debt relief relies on negotiating down the amount of debt you owe and is generally done by companies that charge a fee for their services. Debt relief companies generally encourage clients to stop paying bills on their debts that are enrolled in the program and instead save for settlements in a savings account.
Debt consolidation, however, is generally done on your own. This process relies on a personal loan to pay off debt, then leaves the personal loan as your main debt to pay down. It can help you keep track of your debts better by rolling them into one debt, and in some cases, it can lower the interest rate you'll pay for some high-interest debts.
Here are CNBC Select's best debt consolidation loans to consider:
- Best for student loan consolidation: SoFi
- Best for fair/average credit: Upstart
- Best for consolidating debt while improving financial literacy: Upgrade
- Best for staying motivated: Happy Money
- Best for good to excellent credit: LightStream
- Best for joint applicants: Prosper
FAQs
What is debt relief?
Debt relief, also called debt settlement, refers to a variety of programs and services that can help people reduce their debt. Debt relief companies negotiate with creditors to lower the amount you owe on your unsecured debts, which includes things like personal loans, credit cards and medical debt. They generally don't work with secured loans, or loans backed with collateral, like mortgages and auto loans.
What does a debt relief company do?
After negotiating, the debt relief company pays for an agreed amount that will settle your debt with money put aside in a savings account. Generally, these programs encourage people who have enrolled to stop paying on credit cards and other bills.
By negotiating how much debt is owed, these debt settlement companies claim that clients could pay less overall and get out of debt faster.
However, the Consumer Financial Protection Bureau, a government agency for consumer protection, states that debt settlement could leave people deeper in debt than they were when they started. Since clients are encouraged to stop paying their debts and instead fund a savings account, potential risks include creditors filing lawsuits for nonpayment, and a buildup of late fees and interest that could be greater than the original debt enrolled.
How long does debt relief take?
The entire debt relief process can take around three to four years.
How much does debt relief cost?
Debt relief generally costs between 15% and 25% of the total amount of unsecured debt (or debt that's not backed by an asset) that you enroll in the program.
Does debt relief destroy credit?
Debt relief or settlement causes an estimated 100-point credit score decrease, according to the National Foundation for Credit Counselling.
What are the cons of using debt relief programs?
There are several cons you should be aware of when using a debt relief program.
- Your credit score could decrease. The estimated decrease is around 100 points, according to the National Foundation for Credit Counselling.
- It can be expensive. Many of the companies we considered charge fees between 15% and 25% of the unsecured debt enrolled in the program.
- It could raise your tax bill. Debt relief works by getting creditors to take less than what you owe on your debts. The amount that's forgiven generally becomes taxable income that you're responsible for paying taxes on.
Can I do debt relief myself?
Debt relief relies on settling debts with creditors for less than the original amount. You could do this yourself and save on the fees. With some time, persistence, and savings to pay for the debt once you've reached a settlement, it's possible to do this yourself.
There are also other options for your debts available. Things like debt consolidation are also an option, which can help you to roll all your debts into one debt, and potentially decrease the interest rate owed. With this option, you won't see the same fees charged by debt relief companies. Rather, you'll pay interest and any applicable fees on a personal loan or a debt consolidation loan.
Bottom line
Debt settlement is one option to help pay off your debt, but it could mean sacrificing your credit score, paying additional fees and owing more in taxes. If you've exhausted all other options and are still struggling, a debt relief company could reduce the amount you owe and help you pay off your debt.
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Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every debt relief review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of debt relief products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best debt relief companies.
Our methodology
To find the best debt relief companies, CNBC Select analyzed more than a dozen U.S. debt relief companies.
When narrowing down and ranking the best debt relief companies, we focused on the following features:
- Fees. Most debt relief companies charge fees for their services. We focused on those with the lowest fees. Additionally, we focused on those that were transparent about those costs and display them on their websites.
- Better Business Bureau accreditation. To be BBB accredited, companies must meet standards for transparency, honest advertising, trustworthiness, responsiveness and privacy, among other things.
- Customer satisfaction ratings. The BBB measures customer satisfaction through ratings left on its website. We considered both the rating and the number of reviews received.
- History. We considered the number of years a debt relief company has been operating.
- States where service is available. We considered the number of states where the service is available, prioritizing those that were more widely available.
After reviewing these features, we sorted our recommendations by best overall, best for large debts, best for credit card debt, best for tax debt and best for customer satisfaction.
All of the companies on this list are accredited by the American Fair Credit Council (AFCC).
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