If you are one of the many Texans with financial woes, debt settlement or consolidation may be a solution. Our partners at ConsumerAffairs researched the best debt consolidation in Waco for companies offering top-notch service and valuable relief to residents when they need it the most.
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Almost 45 percent of Texans have debt in collections—much higher than the national rate of 33 percent, according to the Urban Institute. Juggling a variety of debts and monthly payments can be a costly headache, which is why some people choose debt consolidation, which includes debt consolidation loans and debt settlement.
A debt consolidation loan combines multiple high-interest debts into one single payment at a lower interest rate.
With debt settlement, you work with a company that negotiates with creditors on your behalf to reduce what you owe in unsecured debt. Unsecured debt includes credit card bills, medical bills, student loans and other debts without collateral. By contrast, secured debt, such as car loans and mortgage loans, is not eligible for debt settlement because creditors have a right to repossess the collateral.
Debt settlement might be a good solution if you:
Are delinquent on accounts
Already have a damaged credit score
Think a creditor may accept partial payment
Have $10,000+ in debt
If you have less than $10,000 in unsecured debt, there are options that include:
Zero-percent interest balance transfer credit cards
Debt counseling services
Home equity loan
How does debt relief or consolidation work?
Debt relief agencies work to minimize your monthly payments. They contact your creditors to either reduce your interest rate or lower your monthly payments. Once this work is done, you pay the agency itself, who then distributes the money to each creditor for you.
Debt settlement companies charge a fee for their service, between $500 and $3,000 (sometimes higher, depending on your case). These fees are not applied to your debt and are for the service itself. This fee can be worth the total savings. A study by the Center for Responsible Lending found that, on average, debts are settled at 48 percent of the outstanding balance.
In addition to settlement fees, you may be required to pay federal taxes on your total payment, not the reduced sum. If settlement results in a debt reduction of more than $600, the IRS is notified and you will still have to pay taxes for the entire debt.
How long does it take?
While this is an effective solution, it’s not swift. Debt management programs typically take between two to four years to truly eliminate debt, assuming you make every monthly payment on time and in full. If you miss a payment, the agreement that your agency makes with your creditors can be voided.
The reason it takes this long is that the agency sets affordable amounts for you to pay monthly. The monthly payments to the agency do not go directly to your creditors; the debt relief agency will keep it until they can pay off your creditors in a lump sum.
Does debt consolidation affect my credit score?
Yes. With this solution, you will see an immediate decrease in your credit score because you stop payments to your creditors. Debt settlement agencies also require you to close all but one credit card, which also negatively impacts your credit score. But once you start paying off your balance, your score will eventually improve, although debt settlement will show up on your credit report.
Debt consolidation vs. bankruptcy: Which is better?
The Federal Trade Commission suggests that before you declare bankruptcy, you should work with a credit counseling service to create a debt repayment or settlement plan if possible. Bankruptcy has significant consequences, such as costly attorney fees and damaging credit scores.
Debt consolidation is a serious decision that impacts your life for years to come. Be sure to understand your options so you know what to expect if you decide this service is right for you.
With gold ratings and excellent reviews, National Debt Relief is a trusted name in the industry. National Debt Relief can reduce debt up to 49 percent through transparent, helpful customer service and no upfront or cancellation fees. National Debt Relief is accredited by the BBB and is a member of the American Free Credit Council.
With debt solutions occurring within just 24 to 36 months, Credit Associates has one of the lowest timeframes in the market. Credit Associates has settled over 218,000 accounts in just 12 years. Customers can get a free, no-obligation debt consultation by speaking directly to one of its many trained advisors. Credit Associates earns excellent ratings from Texas customers.
With multiple programs, Accredited Debt Relief tailors the right relief to your situation. Customers can get a free consultation or use its online tool to see how much they can save with Accredited Debt Relief. Accredited has been nationally recognized by a variety of outlets for its customer support and consolidation services.
Since 2002, Freedom Debt Relief has resolved over $9 billion in customer debt for more than 600,000 clients. Customers can get a free, no-risk debt consultation that includes an overview of fees and savings they can expect. Its simple client dashboard gives customers 24/7 access to their status and progress, plus useful budgeting and financial tools.
According to US News and World Reports, Pacific Debt is one of the “The Best Debt Settlement Companies of 2018” and was recognized for its low fees. Customers work with a personal account manager throughout their time with Pacific Debt, which is not always common. Reviewers appreciate this attention to detail and the customer service.
If your credit card debt exceeds $7,500, this debt settlement company can help. Debt Rx is small enough to offer individual solutions for debt relief. If you’re behind on bills, Debt Rx can help keep creditors away as mentioned in customer reviews who spoke highly of their effective service.
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Our partners independently research companies, and use editorial discretion to award companies with special recognition (i.e. Best Value) based on their staff’s judgement or subject matter expert’s judgement. Our partners do this to help you identify companies that will meet your specific buying needs, and do not receive compensation for these designations.