Why Debt Relief Is A Scam (and What You Can Do Instead)

Americans are still making this mistake.

Savings experts are surprised millions of Americans still don’t know the difference between debt settlement and debt consolidation in 2025.

Many people still fall for “debt relief” programs promising to completely wipe off your debt, despite there being so many horror stories.

Here’s how the process goes behind-the-scenes with a debt settlement company:

1. They get you by promising a lower payment.
2. After you sign up, they take your monthly payments and save that money in an escrow account (only after they’re finished collecting the initial fees).
3. They ignore your creditors and stop paying your credit card payments until you are officially in default, about 6 months to a year later.
4. They then negotiate your debt by offering a lump sum (out of the escrow account) to your creditor to settle as low as 20% of your debts.

When it’s explained like this it doesn’t sound too good, does it? But it gets worse:

These programs usually charge outrageous settlement fees — around 25%.

That means if you enroll in debt settlement with $30,000 in credit card debt, and you’re able to settle for $15,000, you might pay a settlement fee of $7,500 (25% of $30,000). This is in on top of to the $15,000 you pay to your creditors. Meaning all together you’d pay $22,500 total.

It gets even worse:

• Ignoring your creditors will completely destroy your credit score.
• Your debt will increase due to interest and late penalties.
• You will pay taxes on your forgiven debt as it’s considered income.
• They cannot guarantee your debt will be resolved by the end of the program.
• Your creditors may reject the settlement and sue you.
• You will be on your own if you go to court, debt relief companies won’t help with that.

But you’ll never hear them talk about this in their commercials, just happy people and few details.

So how is debt consolidation better?

Debt consolidation is when you take a special loan to pay off all your high-interest debts, such as credit card balances and personal loans. The result?

A single lower monthly payment, at a lower fixed interest rate.

If you struggle to see your credit card balances go down, no matter how much you pay — it’s because credit cards have a very high interest rate (usually 29%), meaning what you pay is only going towards the interest instead of killing the actual debt amount.

With a lower interest rate, you will get out of debt way faster — even if you pay the same amount you were paying towards the credit cards.

Also, having just 1 payment instead of 5-10 payments in a single month will help you massively with your organization and budgeting.

It’s also better than paying off your smaller debts first, one by one. Remember that while you do that, your bigger debts continue to pile on interest (snowball).

Here’s how a debt consolidation loan helps you:

1. You get a loan to pay off your high-interest (usually around 25%) unsecured debts such as credit cards, personal loans, collection accounts, medical debt right away.
2. You pay 8-10% on the new loan.
3. Everyone wins! Your new lender gets a 8-10% return and you save 15% in interest.

(Except your current creditors of course. But they’ve made enough money from your struggle already, so don’t feel bad for them.)

Now, to do this correctly you have to find a lender that will give you a fixed interest rate that’s fair — without a longer repayment period or outrageous initial fees.

And the best way to find a lender is to get quotes from many of them so you can compare apples to apples.

There’s just one catch:

There are thousands of lenders in the US.

So to find the best rate you must go through them one by one to see who gives you the best rate based on your specific state, your specific credit score, and your specific income.

This is because a consolidation loan is a highly individualized product. Every person’s situation is unique.

The company giving me the best deal may be completely different than yours even if we live in the same ZIP code.

That’s why thousands of Americans are using SuperMoney, an independent comparison website that does the heavy research for you.

In just a few clicks you could find lenders offering you a low fixed interest rate loan to pay off your high-interest debt.

SuperMoney.com leverages modern technology to find you the lowest available rates for your needs from a list of 70+ top lenders — you will only be presented companies in your ZIP code with high customer satisfaction scores.

These include major banks, top credit unions, leading digital platforms, and high interest installment lenders operating across multiple states.

No more long calls and endless wait times with sketchy banks. No more giving your details to strangers over the phone.

So today, you get to stop missing out and finally get to save extra cash every month by getting the affordable rate you deserve.

The process is straightforward, simple, and secure. All you need is your smartphone and to answer a few simple questions.

In a couple of minutes you will find out which lenders you’re qualified with. Then you can compare rates, monthly payments, and repayment terms to choose the loan that works best for you. No obligation to proceed, of course.

To get started, simply tap your age below to check if you qualify for a low enough interest rate: