Our reviewers evaluate products and services based on unbiased research. Top Consumer Reviews may earn money when you click on a link. Learn more about our process.

What Is Debt Settlement?

Saturday, June 19th

What is Debt Settlement?

Living with debt can be a very stressful thing. Every ring of the phone could bring another call from a creditor, demanding money you don't have to give to them.

So what options do you have when the credit hounds are beating down your door?

Debt settlement - also commonly known as debt arbitration, debt negotiation and credit settlement - can be a good option for those who are struggling with debt. A caveat when it comes to debt settlement is that it can negatively affect a consumer's credit, so it should only be considered if a person's financial situation is extremely dire. However, if a person's credit report already is ruined due to failure to repay numerous creditors, the damage already is done and debt settlement will not make much of a difference.

Debt settlement is the final option before full bankruptcy. It is best to avoid full bankruptcy if possible, as it will mar your credit report for 7 to 10 years.

If you decide that the risks of debt settlement are worth the rewards, then you will need to know the best way to go about settling your debt with creditors.

The basic premise of debt settlement is getting a creditor to agree to be paid less than what you actually owe them, and to accept the lesser payment as payment in full. A good debt settlement agency will be able to help a client realize a 40 to 60 percent savings on their total debt.

Most debt settlement companies will establish what is known as a settlement deposit account. Clients will then be advised to stop making payments of any kind to creditors and instead put the money into the settlement account. The debt settlement company will then negotiate a deal on their client's behalf, pulling money from the settlement account to make payments to creditors as needed.

It will generally take three to five years for the settlement process to be complete.

However, there are some cons to the debt settlement process. Aside from your credit report being negatively affected, creditors are not required to accept any settlement offer and can still choose to turn you over for collections. Even if they do accept the offer, interest and penalties will continue to accrue the entire time the negotiation process is underway.

Now that we've discussed the pros and cons of debt settlement, let's review how to find a reputable debt settlement agency.

The first step is to check the reputation of the agency on consumer websites such as the Better Business Bureau. If the agency you are considering using has very many unresolved complaints against them, it should serve as a red flag.

Consumers also inquire as to whether the company has a solid working relationship with creditors and collection agencies. Prior established relationships will go a long way in getting creditors to accept debt settlement agreements.

Lastly, make sure the company provides full disclosure of its fee structures and how all money it collects from you will be used.

The Best Debt Relief Companies Compare Debt Relief Companies Compare Debt Relief Company Reviews What are the best Debt Relief Companies Best Debt Relief Company Reviews

Debt Relief Company FAQ

Debt relief is a process that helps people get out from under their ever-mounting financial obligations. This can be accomplished through Debt Negotiation, Debt Settlement, Debt Consolidation or Repayment Plans, among other strategies.
You'll need to have a certain amount of debt to be eligible for debt relief, which varies according to which relief service you choose. Some require a minimum unsecured debt of $7500, while others specify that you need to owe at least $10,000. Also, some debt relief providers aren't licensed in all 50 states - so you may be eligible for debt relief but the service you're considering isn't available in your state.
Believe it or not, many debt relief services are free! Most providers give you a no-cost consultation, analyzing your financial situation and making recommendations tailored to your needs. But, there are some fee-based services, especially if you want someone to negotiate with creditors on your behalf.
Many of the strategies used by debt relief providers can be done on your own, yes. But, in the amount of time it would take you to get up to speed and learn what those strategies are, you could be paying hundreds (or thousands!) of dollars in interest. It's almost always a smarter financial move to have the experts do the work for you.
The first step is usually the complimentary consultation, where a representative will go over your debt situation and find out your goals, needs and timeframe. From there, it will depend on which approach you decide to take - but, for the most part, the debt relief service will be in charge of contacting your creditors and working out the details for reducing what you owe.
No two consumers are alike - and debt relief strategies vary as well. Some services offer relief through a personal loan, allowing you to pay off high-interest debt with a lower-interest arrangement, so naturally your situation will change as soon as your loan is funded and used to reduce your monthly payments. On the other hand, if your service is negotiating with your creditors to reduce or eliminate what you owe, that can take several weeks to months.
Most of the time, there isn't. A few debt relief services offer a 100% customer satisfaction guarantee, allowing you to cancel your plan without fees or penalties. Read the fine print of any contract before you sign up, so you'll know exactly what's promised - and what isn't.
Debt relief may sound too good to be true, but it's a legal, well-known method for reducing the debt burden faced by many consumers. Although some fly-by-night services pop up from time to time, most companies offering debt relief have been in business for a decade or longer. You can always check for a company's listing with the Better Business Bureau for further confirmation that it's a trustworthy option for debt relief.

Compare Debt Relief Companies

Select any 2 Debt Relief Companies to compare them head to head

best-debt-relief-companies
  • National Debt Relief
  • Credit.org
  • Curadebt
  • Upstart
  • SoFi
  • LendingTree
  • CareOne Debt Relief Services
  • LendingClub
  • American Debt Enders
  • Accredited Debt Relief
  • OneMain Financial
  • Savvy Money
  • Debt Consolidation Care
  • Fast Track Debt Relief
National Debt Relief vs Credit.org National Debt Relief vs Curadebt National Debt Relief vs Upstart National Debt Relief vs SoFi National Debt Relief vs LendingTree National Debt Relief vs CareOne Debt Relief Services National Debt Relief vs LendingClub National Debt Relief vs American Debt Enders National Debt Relief vs Accredited Debt Relief National Debt Relief vs OneMain Financial National Debt Relief vs Savvy Money National Debt Relief vs Debt Consolidation Care National Debt Relief vs Fast Track Debt Relief Credit.org vs Curadebt Credit.org vs Upstart Credit.org vs SoFi Credit.org vs LendingTree Credit.org vs CareOne Debt Relief Services Credit.org vs LendingClub Credit.org vs American Debt Enders Credit.org vs Accredited Debt Relief Credit.org vs OneMain Financial Credit.org vs Savvy Money Credit.org vs Debt Consolidation Care Credit.org vs Fast Track Debt Relief Curadebt vs Upstart Curadebt vs SoFi Curadebt vs LendingTree Curadebt vs CareOne Debt Relief Services Curadebt vs LendingClub Curadebt vs American Debt Enders Curadebt vs Accredited Debt Relief Curadebt vs OneMain Financial Curadebt vs Savvy Money Curadebt vs Debt Consolidation Care Curadebt vs Fast Track Debt Relief Upstart vs SoFi Upstart vs LendingTree Upstart vs CareOne Debt Relief Services Upstart vs LendingClub Upstart vs American Debt Enders Upstart vs Accredited Debt Relief Upstart vs OneMain Financial Upstart vs Savvy Money Upstart vs Debt Consolidation Care Upstart vs Fast Track Debt Relief SoFi vs LendingTree SoFi vs CareOne Debt Relief Services SoFi vs LendingClub SoFi vs American Debt Enders SoFi vs Accredited Debt Relief SoFi vs OneMain Financial SoFi vs Savvy Money SoFi vs Debt Consolidation Care SoFi vs Fast Track Debt Relief LendingTree vs CareOne Debt Relief Services LendingTree vs LendingClub LendingTree vs American Debt Enders LendingTree vs Accredited Debt Relief LendingTree vs OneMain Financial LendingTree vs Savvy Money LendingTree vs Debt Consolidation Care LendingTree vs Fast Track Debt Relief CareOne Debt Relief Services vs LendingClub CareOne Debt Relief Services vs American Debt Enders CareOne Debt Relief Services vs Accredited Debt Relief CareOne Debt Relief Services vs OneMain Financial CareOne Debt Relief Services vs Savvy Money CareOne Debt Relief Services vs Debt Consolidation Care CareOne Debt Relief Services vs Fast Track Debt Relief LendingClub vs American Debt Enders LendingClub vs Accredited Debt Relief LendingClub vs OneMain Financial LendingClub vs Savvy Money LendingClub vs Debt Consolidation Care LendingClub vs Fast Track Debt Relief American Debt Enders vs Accredited Debt Relief American Debt Enders vs OneMain Financial American Debt Enders vs Savvy Money American Debt Enders vs Debt Consolidation Care American Debt Enders vs Fast Track Debt Relief Accredited Debt Relief vs OneMain Financial Accredited Debt Relief vs Savvy Money Accredited Debt Relief vs Debt Consolidation Care Accredited Debt Relief vs Fast Track Debt Relief OneMain Financial vs Savvy Money OneMain Financial vs Debt Consolidation Care OneMain Financial vs Fast Track Debt Relief Savvy Money vs Debt Consolidation Care Savvy Money vs Fast Track Debt Relief Debt Consolidation Care vs Fast Track Debt Relief
Compare the Best Debt Relief Companies
- VS -
Review the Best Debt Relief Companies
See the Best Debt Relief Company
The Best Reviews of Debt Relief Companies