National Debt Relief vs. Cambridge Credit Counseling

Debt settlement vs. a debt management plan

These two companies sell different products, which is why the choice matters more than the brand.

National Debt Relief does debt settlement. You stop paying the credit cards and other unsecured debts you enroll and put a monthly deposit into a dedicated account in your name. Once enough builds up, the company negotiates a lump-sum payoff for less than you owe, you approve it and it takes its fee. The company says programs last 24 to 48 months.

Cambridge Credit Counseling offers a debt management plan. It is not a loan and nothing is forgiven. You make one monthly payment to Cambridge, which pays each creditor. Creditors set concessions such as lower interest rates and waived late fees using their own guidelines; Cambridge says there is no negotiation. Your enrolled cards are closed while the plan runs.

The CFPB and FTC both suggest looking at nonprofit credit counseling before debt settlement. A plan only works if you can afford the full balance at the reduced rate. If you can’t, settlement or a consultation with a bankruptcy attorney may be the realistic options. Cambridge’s counseling session is free, so it is a low-cost first step even if you end up choosing settlement.

What each one costs

National Debt Relief charges up to 25% of your enrolled debt, depending on your state and balance, and collects nothing until a debt is settled. You also pay the dedicated account provider a monthly fee. Its home page says clients who stay in and settle all their debt “realize approximate savings of 45% before fees, or 20% including our fees, over 24 to 48 months.” On $20,000 of enrolled debt, that average means paying about $16,000 in settlements and fees combined. Not all clients finish.

Cambridge’s counseling is free. A debt management plan carries a one-time setup fee and a monthly fee, set within your state’s legal maximum based on what you can afford. Cambridge does not publish the amounts and says about one client in four gets a reduced fee, so ask for both numbers in writing.

On a plan you repay the full balance, but interest drops. Cambridge reports that its typical client’s rate fell from 28.99% to 7% on average, monthly payments fell 31.1% after fees, and the debt was paid off in 38 months on a plan built for 52. It estimates that client paid $4,936 in interest and fees against $44,676 in interest alone without the plan. Your results depend on your creditors and budget.

Credit, lawsuits and taxes

This is where the two differ most.

With debt settlement, you stop paying enrolled creditors, so late payments, charge-offs and collection accounts show up on your credit reports, and settled accounts are reported as settled for less than the full balance. The CFPB warns that creditors may sue you while you save, and that late fees and interest can leave you owing more. Forgiven debt can count as taxable income; creditors may send Form 1099-C, though an insolvency exclusion may apply. Ask a tax professional.

With a debt management plan, you keep paying every month, which avoids the late payments that do the most damage. Cambridge says setting up a plan may affect your credit, though the effect may be temporary while you keep paying. Closing cards lowers your available credit, and creditors may note the plan on your report. Because you repay the full balance, there is usually no forgiven debt to tax. If you stop making plan payments, creditors can restore rates and fees and pursue collection.

If you need a mortgage or car loan in the next few years, the plan is far easier on your credit.

Reputation and history

National Debt Relief has operated since 2009, has been BBB accredited since 2013 with an A+ rating, and rates 4.7 out of 5 from 45,344 reviews on Trustpilot.

Cambridge Credit Counseling, founded in 1996 in Agawam, Massachusetts, has been BBB accredited since 1998 with an A+ rating and rates 4.8 out of 5 from 459 reviews on Trustpilot. Charity Navigator gives it a Four-Star rating.