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Who are the Top-Rated Debt Consolidation Companies?

Dan Steadman

Financial Advisor, MoneyBeagle

Who are the Top-Rated Debt Consolidation Companies?

If you are already drowning in debt, the worst thing you can do is fall for a scam that will damage your finances even further. In some cases, a debt consolidation loan in itself can have negative effects on your finances, so it is important to find a reputable lender and find the best loan option for your situation. Keep reading for more information on debt consolidation loans and legitimate loan companies.

What is a Debt Consolidation Loan?

A debt consolidation loan allows you to pay off your high interest debts and repay them in one single fixed-price monthly payment. If you have multiple credit cards with high interest rates, you may want to consider a debt consolidation loan, but you have to do some calculations to determine if it will save you money in the long term.

A debt consolidation loan is only beneficial if you have a lower interest rate than your current debts. This can be difficult if you have a low credit score, so it is important to know your current debts so you can compare the rates and monthly payment amounts to your loan options. If the monthly loan payment is not much less than what you are currently paying to your creditors in total, then you may have difficulty repaying the loan.

Stop Accumulating Debts

To use a debt consolidation loan successfully, you will have to adjust your spending so you no longer rely on credit cards for purchases. Achieving financial freedom will only happen if you stop accumulating debts and begin living on only your income. Of course, sometimes in a financial emergency we rely on credit cards, but this can be avoided if you eliminate your debt and begin a savings or emergency fund.

Debt Settlement Plans

The goal of a debt settlement is to pay less than you owe but still pay off our accounts in their entirety. Most debt settlement companies will work with your creditors to determine an acceptable payoff amount. The difficult part is determining how much your debt will be reduced and how this will affect your finances in the long run. Some debt settlement companies boast up to a 50% reduction in your debt, but you should be cautious with this declaration.

There is no fixed determination as to how much your debt may be reduced, and there are many other “catches” that you should be aware of when considering a debt settlement. A debt settlement typically lasts anywhere from 3 to 4 years, and during that time you will be accruing interest on the debt you owe. This will increase your amount of debt, all the while the debt settlement company is working to get the creditors to reduce the payoff amount.

A legitimate debt settlement company will only accept you as a candidate if they feel a debt consolidation loan, debt management plan or bankruptcy is a better option.  Of course, a predatory company or a scam will accept all candidates, even if this is not the best financial option for the consumer. Be sure to research the company you decide to work with and make sure they are legitimate and have a proven track record of success.

While paying a reduced amount may sound great, you should also consider the fees, charges, and rates that will apply. The debt settlement company may charge 25% of the amount of debt that is forgiven, so you are not really reducing your debt by the full settlement amount.  In addition, any debt that is forgiven or settled must be claimed as income on your next year’s taxes. Using a debt settlement company will damage your credit score, as it will remain on your credit report for up to 7 years.  This not only lowers your credit score, but it will increase the interest rates for any future account you may open.

It is possible to get a debt settlement and still end up paying back the amount of your original debt or even more. The excessive fees and interest rates can add up quickly, so it is important to carefully consider if this is the best option for your financial situation.

What to Look for in a Debt Consolidation Company

There are some key factors to look for when searching for a debt consolidation loan company. First, they should be licensed within their state to operate and be registered and accredited with the Better Business Bureau (BBB). A reputable company will not request any personal or financial information before they offer the details of the loans they have available. Of course, they will have to run your credit score to determine the interest rate you will be charged, but that is after you have decided to apply for the loan.

You should never pay a fee up front to a debt consolidation company. Any fees or charges should be included in the loan agreement.

Reputable Debt Consolidation Loan Companies

Below are the names of some reputable debt consolidation loan companies that can be found online. While they have BBB accreditations and proven records of success, just because you use a legitimate company does not mean you are getting a great deal or that you will be saving money by consolidating your debts. These companies may offer debt management or settlement plans in addition to debt consolidation loans.

National Debt Relief

National Debt Relief is a company who offers financial counseling services, credit card counseling and debt consolidation loans. They are one of the largest debt management companies in the United States, and they have a high rate of customer satisfaction, in addition to an A+ rating with the BBB. National debt relief has a proven history of helping consumers achieve their financial goals.

Freedom Debt Relief

Freedom Debt Relieve is a credit advocacy group that was founded by a group of graduates from Stanford Business School. The goal of this company is to help consumers reduce their debts more quickly than other debt consolidation options. This is a large company that has approximately 400,000 clients and a high rate of customer satisfaction. Freedom Debt Relief is also accredited with the BBB with an A+ rating.

Cambridge Credit Counseling Corporation

This is a non-profit credit counseling organization located in the state of Massachusetts, although they offer online assistance as well. They are also a HUD-approved housing counseling agency, and they have an A+ rating with the BBB. The Cambridge Credit Counseling Corporation mainly focuses on counseling services related to bankruptcy, although they do offer debt consolidation services as well.

Other Reputable Lenders

There are other lenders available online who offer loans for debt consolidation or any other reason. Below are some additional debt consolidation loan companies who you can trust to borrow from.

Lending Club

Lending Club is an online lender who has extremely high customer satisfaction ratings. This is a peer-to-peer lender, which means it connects anyone with the means to loan money those who are seeking to borrow money. Typical loan amounts range between $1,000 and $4,000 with annual percentage rates (APR) ranging from 6% to 36%, depending on your credit score The Lending Club is accredited with the BBB and has the highest possible A+ rating, so rest assured you will not be scammed by a lender involved in this organization.

Lending Club loan terms are either a 36- or 60-month payment period, and the response for approval is not immediate, so you may have to wait up to or more than a week to receive approval or funding of the loan. Although electronic withdrawals come with no charge, you will be charged a $15 fee each time you pay by check. Some lenders may even offer discounts if you select automatic pay or electronic withdrawal options.

PersonalLoans.com

PersonalLoans.com is another reputable debt consolidation loan organization to consider. This site offers loans up to $35,000 with APR’s between 5 and 36%. PersonalLoans.com offers peer-to-peer loans, traditional bank loans and installment loans, so you do have multiple options to choose from. PersonalLoans.com is a referral service, so it can be difficult to identify the details and terms of the loan up front.  unless you submit a request for details. A reputable lender will not require you to provide any personal information before providing details of the loans they offer.

Avant

If you have bad or poor credit, you can still get a debt consolidation loan. Avant is an online lender who accepts applicants with low credit scores if their income reflects the ability to repay the loan. Most loans are approved and dispensed within one business day, which is extremely convenient. Loans are available between $1,000 and $35,000, with APRs ranging from 10 to 36%.  Avant is also accredited by the BBB with the highest possible rating, so rest assured you will be working with a legitimate company.

Upstart

Upstart is a lending service that offers loans to college graduates without a long credit history. You need a minimum of a bachelor’s degree to qualify for an Upstart debt consolidation loan. This lender will consider your job history, college degree, your grade point average and test scores, so being a good student does have its benefits! Upstart is a peer-to-peer lender as Lending Club is, and their loans typically have APRs between 6.7% to 24.6% with a maximum loan term of 36 months.

OneMain

Another lender who accepts applicants with bad or poor credit is OneMain. They are available online and they also have store locations throughout the United States. They are accredited with the BBB and have an A+ rating, so they are a legitimate lending company

LightStream

LightStream offers debt consolidation loans between $5,000 and $100,000 with APRs ranging between 5.5 and 14.4%. Loan terms range from 2 to 7 years, and there are no other fees associated with the loan This is one of the best debt consolidation loans around based on the loan fees and interest rates.

The excellent rates of LightStream loans are in part due to their excessive eligibility requirements. Let’s be honest, if you are looking for a debt consolidation loan, you probably don’t have the best credit score. Light Stream will only accept applicants with excellent credit scores and significant amounts of income.

Prosper

If you have a credit score of at least 640, then you will most likely qualify for a Prosper loan. Prosper will consider your income and other financial factors in addition to your credit score to determine your eligibility. This lender offers loans between $2,000 and $35,000 with APRs from 6% to 36%. You will also be charged a loan fee of between 1% and 5% of the loan amount.

Find the Best Option for You

A debt consolidation loan can either help or hurt your finances. It is important to use a reputable lender, but it is also important to understand the details of the loan. You will need to set aside some time to calculate your debts and prioritize them by interest rate so you can determine which debts you need to consolidate, and how much you will need to pay them off. Knowing and understanding your debts will allow you to make a better decision for your financial situation.

As mentioned previously, you will only be successful in eliminating your debt with a consolidation loan if the loan has a lower interest rate than what you are currently being charged. You also need to make sure you can afford the minimum monthly payments to repay the loan. Defaulting on a debt consolidation loan is not a good situation, and it can cost you big in late fees, increased interest rates, court costs and more.

Before you sign a loan agreement, be sure to understand what you are signing up for, and have a pre-determined plan for success. If you have a plan and use a reputable company for your loan, you will have a higher chance for eliminating your debts and achieving financial freedom. Once you reach this goal, you can begin managing your finances responsibly and enjoying the things you love the most.

 

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