Updated March 2023
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Choosing the best debt relief services

Last Updated June 2023

It’s easy to fall down the well of spiraling debt. If it hasn’t happened to you, it may very well have happened to someone you know. Major credit card companies lure customers in with promises of low rates and free balance transfers. Superstores, mortgage companies, and auto loan businesses entice people with amazing credit offers. And, as the story goes, the debt begins to snowball.

Unfortunately for many of us, this story often ends with unpleasant collection calls, final notices, and repossessions. In the midst of such stressors, bankruptcy may seem like the only viable solution.

Fortunately, it’s not. There are a number of options designed to help consumers pull themselves out of financial quicksand. One such option is debt consolidation.

Debt consolidation services help people manage unsecured debt that stems from credit cards, personal loans, and in some cases, unpaid medical bills.

If you find yourself buried in significant debt and want to discuss your options with a professional, a debt consolidation service can help. To learn more about the debt consolidation process in general, please continue reading this service shopping guide.

If you’re looking for an alternative to bankruptcy, consider a debt relief service. The services can bring you financial relief without the need for attorneys, bankruptcy courts, or trustees.

What is debt consolidation?

Many people facing a credit or debt crisis have outstanding balances on a number of different accounts. For example, a person may owe $10,000 on a major credit card, $2,500 on a department store charge card, and $3,000 on a student loan.

A debt consolidation service negotiates with individual creditors and combines all of these outstanding balances into one. The creditors receive direct payments, and the client repays the consolidation, including interest and fees.

Many debt consolidation companies are considered nonprofit entities. However, some for-profit debt settlement businesses also exist. They will consolidate a client’s outstanding balances into one new loan, but they can legally add fees to the balance based on a percentage of the total debt involved.

Before making first contact

Here are some steps you should take before signing on with a debt consolidation service.

Do some comparison shopping

The debt consolidation industry is a competitive one. We strongly urge consumers to look for a company with positive customer references, a strong Better Business Bureau rating, and five to ten years of experience in the debt consolidation industry.

Compile a list of your creditors and account balances

Whether you opt for a debt consolidation plan or not, this information is good to have on hand. The debt consolidation company you ultimately choose will ask for this information anyway.

Sometimes an account or loan with a small balance should not become part of a consolidation loan. Knowing which accounts to include or exclude in a debt consolidation loan is important.

Decide what level of financial assistance you require

Is debt consolidation the right solution for you? The answer to this question may require a bit of soul searching.

Some people may benefit from money management advice alone; others need a complete debt consolidation reboot.

Types of debt relief services

Potential clients need to understand the differences between a debt consolidation loan and other debt relief programs. All of these services provide relief from aggressive debt collectors, and they all have their pros and cons. In many cases, the debt itself still exists and must still be repaid, but the repayment terms are much more affordable.

Here are four common types of debt relief you can obtain from various service companies.

Debt consolidation loan

Debt consolidation is the primary focus of this service guide, but it isn’t always an easy option, since the same rules of creditworthiness still apply. All of the borrower’s outstanding balances are combined. The lender then creates a new loan to pay off the existing debt.

The interest rate on a debt consolidation loan can be much lower (10% or less) than that of the original debt, so more money goes towards the principal each month. Notably, many accounts remain open under this plan, so the borrower does run the risk of accruing more debt.

Consumer credit counseling plan

Under a consumer credit counseling plan, the client agrees to close all existing unsecured credit accounts. A credit counselor may be able to negotiate directly with each creditor to pay off a percentage of the existing balances.

The client pays the agency a monthly fee which is distributed among all of the creditors included in the agreement. After the entire debt has been paid off (typically over three to five years), the client is released from the agreement.

Home equity line of credit

Owning a home does have its financial advantages, and one of them is equity. The owner actually has more ownership in the home than the lender, so he or she can borrow money against its value.

With a home equity line of credit, a lender extends credit to a homeowner, and the homeowner uses that credit to pay off unsecured debt. The repayment terms of the new loan are often much more affordable than the debt’s existing interest rates, which could be 25% or higher.


A debt consolidation plan will only address the immediate issue of debt relief. It will not address the client’s overall money management habits.

Credit card balance transfer

For many people, the stress of making minimum payments on multiple credit cards can become overwhelming. One popular solution is a credit card balance transfer.

A number of credit card companies allow customers to transfer balances from other credit card accounts to their existing account. This service is often combined with an exceptionally low “teaser rate.”

Approval is not guaranteed, however, and the debt doesn’t actually go away. It merely becomes more manageable under a single creditor.

Benefits of debt consolidation

If you’re trying to decide whether a debt consolidation service is right for you, consider these benefits.

A consolidation loan eliminates the need to send payments to multiple creditors. There is only one due date to remember, and there are no variable interest rates to contend with.

Once creditors receive their share of a debt consolidation loan, there is no longer a need for internal or external collection activity.

It becomes safe for clients to answer their phones and check their mail again.

When overwhelmed with debt, your first instinct may be to contact a bankruptcy attorney. A Chapter 7 or Chapter 13 bankruptcy filing will keep creditors at bay, but it’s an expensive and financially damaging process.

You may be able to get the financial relief you need with a debt consolidation loan instead.


Merely having a plan to get out of debt can lead to increased peace of mind and an improved quality of life.

Debt consolidation FAQ

Q. Will I have to close my current accounts if I get a debt consolidation loan?

A. Some lending institutions require clients to close their existing accounts; others do not. Requiring clients to close existing accounts makes sense in terms of debt reduction, but it can also create problems for clients who still need some accessible credit. Don’t agree to a debt consolidation plan until you understand and agree to all of the company’s terms.

Q. I don’t think I’ll be able to get a credit card for a while. How can I rebuild my bad credit?

A. You may be able to get a secured credit card from a company like Visa. To obtain a secured credit card, you put a deposit down on a card, and the credit card company holds that money in the event that you don’t pay your bill. The details vary from company to company, so if you’re considering a secured credit card, be sure to read the fine print first.

Debt consolidation is one viable solution for people who are drowning in debt. If you’re considering a debt consolidation loan, we urge you to arm yourself with the facts found in this shopping guide first. This service can be a lifesaver, but like all things that matter in life, it must be handled with care.

The team that worked on this review