Debt Consolidation Companies
Where to go when you need to consolidate your debt.
The term “debt consolidation company” is a bit of a misnomer, because rarely does a company solely provide consolidation services, or if they do they often do it under a different name, such as a credit counseling agency. So it’s important to understand what kinds of institutions provide debt consolidation services so you can find the right provider to work with to eliminate your debt.
The information below is designed to help you understand who can provide debt consolidation services for various types of debt. Keep in mind that in most cases, debts can only be consolidated with other similar types of debts. So if you have multiple types of debt to eliminate, you may need several solutions to achieve total freedom. If you need help making a plan to eliminate all of your debts so you can regain stability and save your credit, call us at to speak with a certified credit counselor at no charge. You can also request a free evaluation by filling out our online application.
Companies that consolidate credit cards and other unsecured debts
Most debt consolidation companies that you find online when you just type “debt consolidation companies” into your favorite search engine are focused on helping people consolidate credit cards and other types of unsecured debts. That includes credit cards, store cards, gas cards, unsecured personal loans included debt consolidation loans, medical bills and even in some cases, payday loans.
There are several different types of companies that can provide a path to consolidate all or some of these types of debts:
- Major credit card issuers provide balance transfer credit cards that allow you to move high-interest rate balances from existing cards to another card with 0% APR for a limited time. You can get a Visa, MasterCard, American Express or other major credit card that allows you to consolidate. The card can also be issued through a bank or another financial service provider.
- Banks and financial institutions can not only provide balance transfer credit cards, they can also underwrite a personal debt consolidation loan for you. This is where you get an unsecured personal loan through your preferred financial institution or lender to pay off the debts you currently have, leaving only the loan to worry about.
- Lending comparison websites now allow you to shop for debt consolidation loans, comparing terms and rates from multiple institutions side by side. This is the type of debt consolidation advertised by companies like Lending Tree and Lendio. These companies do not issue the loans themselves, instead they act as a go-between that lets you compare loans from multiple lenders. However, once you’re approved it’s a bank or lender who services your loan, not the loan comparison site.
- Credit counseling agencies are often commonly called “debt consolidation companies” because the debt management program that they help borrowers enroll in is a form of assisted debt consolidation. In a real sense, this is the only debt consolidation option that’s a program run through a third-party company that you go through. In all other cases, you’re simply using a new line of credit to make it easier to pay of your debt.
Medical debt consolidation companies
Medical debt consolidation companies are firms that negotiate with medical debt collectors to settle what you owe on unpaid medical bills, usually for less than the full amount of the original bill. It’s important to understand medical debt does not work like other consolidation, because there’s no interest charges applied – just the bill plus any penalties you’ve incurred. So when you “consolidate” medical debt what you or the company you’re working with usually does is simply negotiate with the collector to remove penalties or in some cases, settle the principal for less than the full amount owed.
Medical debt may be included in a debt management program if the collector or the original service provider agrees for you to include the debt on the program. However, the biggest benefit of going through a credit counseling agency to negotiate lower interest rates doesn’t apply in this situation. The credit counselor can only negotiate on any future penalties.
It’s also worth noting that a medical debt consolidation company is not really doing anything that you could not do on your own. If you have unpaid medical bills and need to eliminate them, call the original medical service provider and try to negotiate directly with each individual provider first. If that doesn’t work, then it may be in your best interest to find a company to negotiate on your behalf or see if the debts can be included with your credit cards on a debt management program.
Student loan debt consolidation companies
There are two types of student loan debt consolidation – federal student loan debts can be consolidated using a Direct Consolidation Loan through the federal government. In this case, the company that services the loan is the Direct Loan Servicing Center run through the Federal Student Aid website.
The other type of company that offers student loan debt consolidation are private lenders who offer private student debt consolidation loans. These loans allow you to consolidate private and federal student loan debt together, but be careful! Once federal student loan debt is consolidated through a private company, you are no longer eligible to use federal student loan consolidation programs OR to qualify for public service loan forgiveness programs. So it’s in your best interest to avoid converting your federal student loan debt to private. Always go through the Federal Student Aid program first to see if you qualify and then work from there.
It’s good to note that there are third-party companies that help you walk through the federal student loan process because it can be confusing. These companies help you identify the right programs for your situation so you can get lower payments that work for your budget and see if you qualify for forgiveness.
These companies DO NOT consolidate your debt, they just help you sign up and prepare documentation for the federal programs. Often if you type “student debt consolidation companies” into a search engine, this is the type of service that will come up. Just make sure the company you talk to is a document preparer rather than a company who provides private loans to consolidate your debt.
Tax debt consolidation companies
“Tax debt consolidation” is another tricky term like “medical debt consolidation” because it’s a type of debt that really doesn’t work the same as your credit cards or traditional loans. Penalties and interest are assessed by the IRS. Interest starts accruing on tax debt as soon as the filing date passes – whether you file or not. That interest rate is usually not negotiable, because it’s a penalty assessed by a government agency.
So rather than interest rate negotiation, you have what’s known as penalty abatement. If you or your tax debt relief provider can prove you didn’t pay for a “reasonable cause” then you can have penalties removed to reduce what you owe – but you still owe the debt.
Essentially, tax debt consolidation refers to an installment agreement (IA) that you set up with the IRS. It pays off multiple years of tax debt under a single repayment plan, but you usually still pay back everything you owe and only some penalties may be removed.
You can arrange an IA on your own or use a certified tax professional to help negotiate for you. Any company that offers tax debt consolidation is usually just a fancy name for a group of certified public accountants who specialize in tax debt relief.