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Best Debt Settlement Companies: (+ Credit Card Programs)

Carl Andrews

Financial Advisor

Debt Settlement

Choosing the Best Debt Settlement Company

Have you racked up a few bills and started to feel the repercussions of poor financial decisions? Has the thought or fear of missing another payment become more prevalent than ever before? Before you are quick to panic, there are many other credit holders that are in the same situation as you. For borrowers’ sake, there are ample opportunities that are available for individuals in debt – more formally known as debt relief. One example or one opportunity that is available for individuals like you is debt settlement.

Today, debt settlement has built a reputation is the negative light; however, in today’s article, we are going to shine light in an unbiases perspective. Our goal is to highlight both the positives and negatives of debt settlement. The truth is though, debt settlement is a viable option for thousands of credit holders, potentially including you. The negative light that revolves this industry can be attributed to many different factors, some of which we will explore in this article. By the end, you will know precisely whether debt settlement is viable for you, how it works, and how to pick the best debt settlement company for you.

What is Debt Settlement?

Once you are deep in debt and you are not sure where the light is at the end of the tunnel, debt settlement is a viable option to help organize your debt and begin crawling towards financial freedom. Simply put, debt settlement is the process where an individual negotiates with creditors to pay less than the total amount owed, as seen in the contract or monthly statements. In most cases, consumers are not the one’s doing the negotiations – debt settlement companies are. These companies are considered the third-party and will handle all of the consumer’s personal finances.

As you might imagine, such a financial venture can be incredibly risky. Through hiring a third-party company to negotiate total debt is seen as a violation of contract by creditors, which is subject to law suits, higher fees, and rates. With that being said, it’s vital that consumers are well educated as how-to debt settlement works and the many different variables that are at play. This is why debt settlement has been named one of the most controversial debt relief programs available to date. However, through proper awareness and knowledge of debt settlement, these debt relief programs can prove to be extraordinarily effective and impactful.

PROS

  • With debt settlement, if done properly, consumers can find themselves saving thousands of dollars, resulting in significantly less stress.
  • When an individual utilizes debt settlement, they will receive expert advice and feedback, depending on the company they choose.

CONS

  • If a creditor does not accept a debt settlement claim, it may leave consumers further in debt.
  • Out of the many different forms of debt relief, debt settlement can leave the biggest mark on one’s credit score and report. This can be attributed to how long it takes for a debt settlement company to settle the debt with creditors. If a company takes 6 months to settle your debt, that is 6 months of missed payments reported on your credit report, which can take months, if not years to fix.
  • Debt settlement programs typically charge hidden fees and penalties that consumers are not aware of.

How does Debt Settlement Work?

Now that we have a basic understanding of what debt settlement actually is, let’s begin exploring and unpacking how debt settlement actually works. As we explained, debt settlement is the process of trying to significantly reduce the amount of debt that you owe to specific companies. In effort to best explain the functionality of debt settlement, it would be best to break it up into three different categories.

  1. Companies

When debt settlement companies, consumers will immediately begin stopping their monthly payments for their unsecured debts. However, the money that was funded to the creditors will be used to pay the debt settlement company. On the debt settlement company end, they will take the money and deposit it into a specific account, which will be disclosed during the application process. From there, the debt consolidation company will begin the negotiation process with your creditors, only once they feel you have enough saved in the personalized account. During this time period, a consumer’s credit report will be impacted, portraying each late payment and fee. At the same time, debt settlement companies are legally unable to charge any upfront fees. In fact, debt settlement companies will make their money based upon your debt or percentage of your debt that was eliminated. All of this information is generally shared during the application process.

  1. Lawyers

Another debt settlement option that is available for consumers is known as a debt settlement lawyer. Typically, most consumer stay away from debt settlement lawyers simply because they are naturally more expensive. Debt Settlement Lawyers will handle matters in an equivalent fashion; however, they may charge by the hour, on top of how much total debt was eliminated and creditors they are needing to settle debt with. In light of this, it’s a generally accepted to use debt settlement companies because of this.

  1. Yourself

The last option for debt settlement that is available is the do-it-yourself method. What many consumers do not realize is, sometimes, you do not need to hire a debt settlement company or lawyer to handle your personal finances. In fact, if you are significantly behind or deep in debt, you can take matters into your own hands. However, we do suggest that, before you are quick to pick up the phone and call your creditors, do the proper research on DIY Debt Settlement. This is a trend that is picking up across the world so there is ample research discussing this technique. In our experience, being honest with creditors is one of the best forms of debt settlement. In sharing your personal experiences and asking for personal requests, you may be able to decrease the monthly payments, reduce the interest rates, or better.

What are other Debt Relief Options?

As we said above, there are many different debt relief options, aside from debt settlement, to offer as many possible solutions to individuals in debt. While the purpose of this article is regarding debt settlement, we are going to briefly discuss the other debt relief options that are available for individuals in debt. This is in efforts to ensure that debt settlement is best for you.

  • Debt ConsolidationDebt consolidation is a debt relief program where individuals may choose to take all of their unsecured debt and merge them into one monthly payment. In this done by opening one loan to pay off all significant and outstanding debt. This is considered by some to be the best way to pay off debt.
  • Debt ManagementDebt management is debt relief program where individuals enroll in a specific company and receive specialized help for their specific situation. Debt management companies craft debt management plans tailored to a consumer’s needs. This program is most like a debt settlement plan.
  • Credit Counseling – Credit counseling is another debt relief program that is available for consumers. Through seeking credit counseling, consumers may not achieve the desirable results, like debt settlement; however, they may provide valuable information and insight to begin making financially sound decisions.
  • Bankruptcy – Bankruptcy is known as the absolute last resort for consumers. Filing for bankruptcy can and will debilitate an individual’s credit score and report for 7 years; however, it will give them an opportunity to have a fresh start.

Five Tips to Pick the Best Debt Settlement Company

At this point, you have a much better understanding as to what debt settlement is and how it functions. As you can see, debt settlement is not the only debt relief option available to consumers. In light of this, out of the many different debt relief programs, this one has been rated one of the riskiest and most controversial options. So, if you are planning on utilizing a debt settlement company, it’s imperative that you ensure you best a trustworthy company that places your best interests first. Here are five tips that can help accelerate this process:

  1. Check Reputation and Reviews

One of the best pieces of advice that we can give anyone looking to pick the best debt settlement company is to research their reputation. The best way for any consumer to do this is through utilizing the Better Business Bureau. Here, consumers can learn a wealth about a debt settlement company, including their reputation and previous customer reviews. The BBB is a place where consumers can share their personal experience, whether positive or negative. On top of this, consumers can cross-reference accreditations to ensure that a debt settlement company is legitimate.

  1. False Advertising

Another crucial tip that can help in picking the best debt settlement company is through evaluating the companies advertising strategies. What we mean by this is, is the debt settlement company making any false promises or guarantees? If a company is promising to eliminate your debt or fasten the process -this is false advertising. Sadly, this a common practice in the debt settlement industry, which can be discerning to some consumers. However, if you can weed out the bad companies, you can shine light on the magnificent debt settlement companies making a difference providing excellent debt relief.

  1. Fees and Charges

In selecting the best debt settlement company, it’s crucial to take into consideration their fees and charges. If a company is charging upfront fees, high maintenance fees, or other applicable high costs, chances are, they are not worth your consideration. In the debt settlement market, there are ample companies offering great services with minimal fees and charges. With that in mind, it’s advised to stay away from companies that are asking for money in advance, especially before a settlement case has been decided.

  1. Honest Answers

During the process of selecting the best debt settlement company, we highly recommend that consumers take the time to ask questions. For example, you should ask settlement companies whether your credit will be impacted, if they charge upfront fees, or whether debt settlement comes with tax impacts. In this, the best debt settlement companies will provide you with the honest answer, regardless of how positive or negative it may be. For example, when it comes to your credit score, no matter the debt relief program, an individuals credit score will be impacted. When it comes to debt settlement, an individual’s credit score is impacted the most, aside from bankruptcy. In our opinion, a company that is upfront and honest with their program and loan is most certainly worth consideration than those that lie or hide answers.

  1. First Settlement Date

Another pertinent area to take into consideration when measuring a debt settlement company is when the first settlement date would be. Now, it’s important to keep in mind that your first settlement date is incredibly important. During the period that you stop paying your monthly bills to creditors, your credit report will be impacted. The length of time it takes between the your first “missed” bill and your first settlement will determent the impact on your credit score and report. So, the goal here is to find companies that offer reasonable results. Typically, companies are able to plan the first settlement date within the first 90 days of the contract. Companies that are advertising anything under 30 days may seem a bit unreasonable, or a scam.

Taking Control Over Your Debt

If you are currently over your knees in debt, there are many different debt relief programs that are available to help you out. One of the riskier options available to consumers is debt settlement. Here, consumers place their personal finances in the hands of a third-party company, known as a debt settlement company.

Through-out this article, we have shared some very useful tips and tricks that can be utilized to help take control over your debt with debt relief and eliminate it once and for all. While debt settlement is the most controversial, by ensuring that you pick the best debt consolidation company, it can prove to be extremely beneficial.

FAQ

Debt settlement can assist consumers in gaining control over their finances and creating a more feasible debt management plan for a reduced debt load. For consumers who are struggling with debt, it can be a challenge to find financial balance. However, with debt settlement, they can begin to rebuild their finances for the better.

Debt Settlement & Your Credit

Prior to obtaining a debt settlement, consumers often wonder what impact if any a debt settlement has on their overall credit score. By learning more about how the debt settlement process affects your credit, you can make the best decision for your financial future. Use a debt reduction calculator to get a clearer picture of your options.

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Do debt relief programs affect your credit score?
Debt relief programs can impact your credit score by either raising or lowering your score depending on which type of program you choose. A debt settlement can lower your score by 70 to 140 points.
How long does a debt settlement stay on your credit report?
Debt settlement can affect your score in the same way that a bankruptcy filing would. A debt settlement can stay on your credit report for as many as seven years.
How long does it take to recover from a settlement on your credit?
After performing a debt settlement, your credit will be impacted so it is important to keep this important factor in mind. Consumers can start to rebuild their scores in 12 to 24 months.
How does a settlement affect your credit score?
If you choose a debt consolidation loan to settle your debt, you can actually raise your credit score. A debt settlement can have the opposite effect and may actually lower your score.
How long to rebuild credit after debt settlement?
After settling debt through a debt settlement, it can take a year before you can begin working on your credit again. In some cases, you may have to wait two years to begin rebuilding your credit.
How does debt settlement look on credit report?
A debt settlement can end up looking like a bankruptcy on your credit report unless you choose a debt consolidation loan. Timely payments on a debt consolidation loan can improve your score.
Will credit score improve after debt settlement?
To improve your credit score after a debt settlement, make sure to keep the balance on all revolving accounts below 30% while also making timely payments on your debt settlement loan.
How to remove debt settlement from credit report?
Prior to settling a debt, have the company agree to not report the debt on your credit report. They should send a written and signed letter to this effect which will help to protect your credit score from harm.
Does offering debt settlement hurt credit rating?
Debt settlement can in fact hurt your credit score by lowering it anywhere from 70 to 140 points. Prior to completing a debt settlement, it helps to understand the impact it will have on your score.

All About Debt Settlement Companies

Perhaps as important as deciding whether or not to complete a debt settlement is the decision about which debt settlement companies to choose. Learning what to look for when choosing a debt settlement company can aid you in making the best possible selection for your needs.

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How to tell if a debt settlement company is legitimate?

One of the best ways to tell whether or not a debt settlement company is legitimate is to do your due diligence and perform sufficient research. You can find out if the company is legitimate just by researching online.

Are debt settlement companies scams?

No, debt settlement companies are not scams, however, there are fraudulent companies that prey on consumers. It is important to notice red flags such as asking for a payment upfront. You may also want to consider debt consolidation companies as another option.

Are there any legitimate debt settlement companies?

There are many legitimate debt settlement companies who are able to help consumers improve the state of their financial health. Two of the most popular companies are Freedom Debt Relief and National Debt Relief. These companies can be found online as well as in local directories.

How do debt settlement companies work?

A debt settlement company negotiates with a creditor on behalf of the debtor to reduce the principal of the loan, lower the interest rate, or lengthen the terms of the loan to reduce payments.

How much do debt settlement companies charge?

Debt settlement companies charge a fee for their services and this amount can vary greatly amongst different companies. Fees can range from $500 to $3,000 depending on the company.

How to choose a debt settlement company?

When choosing a debt settlement company, it is important to select one that will charge you the lowest fees and save you the most amount of money at the end of the program. Also remember to choose a company that works in your state.

What is a debt settlement plan?

A debt settlement plan is a program set up by the debt settlement company to allow you to make your payments directly to them. They will then send payment to your creditors once you have made a deposit into your debt settlement account.

Credit Card Debt & Debt Settlement

Often the most common type of debt burden that consumers face is related to credit card debt. By taking the time to understand debt settlement in relation to credit card debt, consumers will have a better idea about which options are best suited to reducing their credit card debt load.

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How to negotiate credit card debt settlement yourself?

To negotiate a credit card settlement with your creditor, the first step is to contact the collections department. You will then need to make an agreement to pay off your debt at favorable terms. Don’t forget there are other credit card debt relief options available.

How can I get rid of credit card debt legally?

A debt relief company can provide information and advice about how to legally reduce your debt through a debt settlement or debt consolidation program. They will negotiate with your creditors to legally reduce your credit card debt. Read more on how to get rid of credit card debt here.

How much can you settle credit card debt for?

You can negotiate with creditors to settle your debt for less than you owe. The debt can be settled in a lump sum payment arrangement. The amount you can settle for will vary based on each creditor.

Can you settle credit card debt if you are current?

If you are current on your credit card bill then you do not have an outstanding balance with the credit card company. There is no need to settle credit card debt if all of your balances have been paid. Another option you may want to look at though is credit card consolidation.

A Look At Debt Settlement

Often the process of debt settlement can appear either too overwhelming or too good to be true for consumers. If you are considering debt settlement as a way to get rid of debt, it helps to learn all of the facts in order to make an informed decision.

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What is a debt settlement program?

A debt settlement program is offered by a debt settlement company who will charge consumers a fee in exchange for negotiating with creditors on their behalf to lower their debt. The debt settlement program can help debtors reduce their overall debt load. 

Is it bad to take a settlement on debt?

Settling a debt can allow you to pay less than the full amount owed. However, this will be reflected on your credit report and can also involve paying substantial fees to the debt settlement company.

How does debt settlement work?

In a debt settlement, your creditors agree to accept less money for a debt you owe them. They may also agree to lower your interest rate or extend the terms of your loan so you pay less each month.

Is debt settlement really worth it?

Although there are fees involved with settling a debt, having less to pay monthly to creditors can free up much needed funds for other necessities. Debt settlement can reduce your debt load and give you peace of mind.

What is better debt consolidation or debt settlement?

Debt consolidation requires you to take out a loan to pay off all of your other unsecured debt. Debt settlement involves negotiating with creditors for more favorable terms on the debt you owe.

What is debt settlement?

Debt settlement describes the process of asking a creditor to reduce the amount owed on a debt in exchange for payment towards the debt, usually in a lesser amount.

Do debt settlement programs work?

There are many different types of debt settlement programs so it is important to find the one that works best for your financial goals. Ultimately, you will want a program that can reduce your overall debt while helping you to pay less each month. Compare debt relief programs reviews to make sure you’re with the best company.

Debt Settlement & Negotiation

Often consumers are unaware that they can negotiate the terms and even the amount of the debt they are legally required to pay. Understanding how this negotiation process works is beneficial to ensuring the most agreeable debt settlement terms.

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How do you negotiate with debt collectors for a lower settlement?

You can negotiate by contacting the debt collector directly. From there, you can negotiate a lower settlement after explaining your financial situation. You can then arrange a payment plan or lump sum payment.

What percentage do creditors usually settle for?

Begin by offering to pay 30% of what is owed on the debt and then go from there. Creditors can sometimes dismiss as much as 70% of what is owed if it is paid in a lump sum payment.

How do you offer a full and final settlement?

You can offer a full and final settlement amount over the phone or you can send a notarized letter directly to your creditor. This will be the amount that is paid as a lump sum payment with no amount owed after this final settlement.

How to negotiate a debt settlement with a law firm?

A debt settlement law firm will negotiate your debt on your behalf so you never have to speak to your creditors directly. They will handle all aspects of the debt settlement for you.

How to negotiate student loan with debt settlement?

Settling student loan debt is similar to settling credit card debt in that a lump sum payment must be made to the student loan creditor and paid off within 90 days. There are other student loan debt relief options available that we talk about throughout our site.

Should I hire a lawyer for debt settlement?

A lawyer will speak to creditors on your behalf and they are aware of the laws that creditors must abide by. However, you can complete a debt settlement on your own or with a debt settlement company.

How can I get out of debt with no money?

The only way to fully get out of debt with no money out of pocket is by filing for Chapter 7 bankruptcy. This process will allow you to dismiss all unsecured debt and related fees.

Can you negotiate with creditors?

Yes, creditors are usually open to negotiations since they would like to recoup at least a percentage of the debt that is owed to them. The negotiation can take place over the phone or through letter form.

Debt Settlement Details

Learning about the details of the debt settlement process can aid debtors in deciding whether or not debt settlement is the best option for their debt relief needs.

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How to do a debt settlement?

The best approach to completing a debt settlement is to arrange with creditors for lower interest rates, lower monthly payments, or a complete reduction in the total amount of debt owed.

What is Zombie Debt?

Zombie debt is the term used for debt that has come back from your past to be collected on anew by another collection agency. This debt typically has been purchased for pennies on the dollar.

Should I file bankruptcy or debt settlement?

Bankruptcy will usually eliminate all unsecured debt and keep your assets protected from seizure by debt collectors. Debt settlement allows you to settle debt for less than the full amount owed.

Can I buy a house after debt settlement?

To buy a house, your lender will first examine your credit score, debt to income ratio, and credit history. It may take 12 to 24 months to rebuild your credit after debt settlement so that you can purchase a home.

How to recover from debt settlement?

After your debt settlement, you will be spending less out of pocket each month for debts that you owe. You can use the excess funds to pay down debt faster so you can recover from debt settlement quickly. 

What is a debt settlement letter?

A debt settlement letter is an official letter to the debt collector proposing settlement terms. It can include an offer to make a lump sum payment or a request for a lower interest rate.

How to cancel debt settlement contract?

You can cancel a debt settlement contract either in writing or over the phone. However, creditors will begin actively pursuing the debt from you once the contract has been ended.

How much does a debt settlement lawyer cost?

The fees from a debt settlement lawyer will vary depending on the amount and type of debt that needs to be negotiated. The fees can range from $500 to $5,000.

How long does debt settlement take?

The length of time for a debt settlement varies depending on the specific terms of your debt settlement plan. The general time frame is between one to three years for completion of the program.

What is debt consolidation vs debt settlement?

Debt consolidation involves taking out a new loan to pay off your debt so you can make one monthly payment to the new loan holder. Debt settlement is paying your debt partially in exchange for the creditor ceasing to pursue the debt any further.

Should I do debt settlement?

The decision to perform a debt settlement is dependent on each person’s unique financial situation. However, debt settlement can help you get out of debt for less than your total debt amount.

How does debt settlement affect your taxes?

The amount of debt that the creditor agrees to forgive is considered as taxable income by the IRS. Make sure to make tax payments on the forgiven debt to avoid issues with the IRS. Learn more about how to fix tax debt problems.

How to write a settlement letter to a debt collector?

A settlement letter should include your name and date, as well as your account details such as an account number. It should also include the proposed terms that you would like the creditor to accept.

Is debt settlement legal?

Yes, negotiating with creditors to pay less than the total amount of debt owed is a completely legal process than any consumer can do. It is legal to offer to settle your debt for a lower amount.

Should I accept a settlement offer from a debt collector?

If after carefully examining the terms and calculating the total pay off cost including taxes on the forgiven debt, you can then make a decision about whether or not to accept the settlement offer.

Carl Andrews


Carl has years of experience helping people tackle debt. As a Senior Financial Advisor, he knows the ins and outs of debt consolidation and debt management. He holds a Masters Degree in Finance and according to him, not all debt problems are the same and that’s why it’s important to take a look at the different options available for your situation.