| When some people become overwhelmed with debt | | | | Because many people find it hard to adapt to a debt |
| and find it hard to pay their bills, they often turn to a | | | | management service, emergencies may come up |
| debt management service. These services can often | | | | where money is needed. It is important to find out |
| be found through credit counselors, and you should | | | | what will happen if you miss payments before you |
| only use a service that you're comfortable with. This | | | | commit to using the service. Each company is |
| service should be more concerned with helping you | | | | different, and some companies may have large |
| than with making a profit. | | | | penalty fees for customers who don't make their |
| What Do Debt Management Services Do? | | | | payments on time. With the rise of debt |
| The debt management service transfers payments | | | | management services, people have often been |
| from their clients to the creditors. In return, they | | | | advised to look for institutions that are non-profit. |
| may take out a commission from the transfer or will | | | | The idea was that organizations for profit would |
| receive fees from the lenders. While debt | | | | focus more on profits than with helping clients |
| management services may work with a wide variety | | | | manage their debts. |
| of different loans, they usually focus on debt that is | | | | Profit or Non Profit? |
| unsecured. They are different from credit counseling | | | | Despite this, many debt management services that |
| services. Those with auto loans or mortgages are | | | | are for profit will advertise themselves as being |
| usually not referred to debt management companies. | | | | non-profit. Using a non-profit organization doesn't |
| Consolidation of Your Debts | | | | guarantee you will get better service than you would |
| Many debt management services offer debt | | | | from a for profit organization. It is best to use |
| consolidation loans. All of your bills and outstanding | | | | services that are accredited with the National |
| debts are combined into one bill. Once this has been | | | | Foundation for Credit Counseling. Accredited services |
| done, it is up to the debtor to make the monthly | | | | are not likely to charge outrageous fees or attempt |
| payments on the loan. If the debt management | | | | to take advantage of their clients. Before you look at |
| service reduces the interest or balances on your | | | | a debt management service, you should call your |
| loans, this can effect your credit. Many lenders will | | | | creditors to see if they can lower your interest rate. |
| view you as being a high risk client when looking at | | | | Getting a Cheaper Rate |
| extending future credit. Despite this, the effect on | | | | Many credit card companies will lower your interest if |
| your credit is less than things such as continuous late | | | | you call them and inquire about it. It may also be |
| payments. A debt management service is also an | | | | possible to use a standard lender as opposed to a |
| excellent alternative to filing for bankruptcy. | | | | debt management service. Under some |
| What's In It For Them? | | | | circumstances it may be necessary to file for |
| It is common for debt management companies to | | | | bankruptcy. You could also get an unsecured loan to |
| earn up to 10% of the money transferred from their | | | | pay off all your debts if your credit is good. |
| clients to the creditors. This along with the fees paid | | | | You should also be wary of debt management |
| to the debt management companies from the | | | | services which are late making your payments. If this |
| creditor can lead to very large profits. As can be | | | | occurs you should immediately call them and get an |
| expected, some companies will try to abuse their | | | | explanation. Your credit can be damaged if they |
| power by persuading clients to sign up for a service | | | | make your payments late, and if they are charging |
| which is driven by profits instead of helping them | | | | you high fees you should cancel their service and |
| manage their debts. | | | | look at other options. |
| Save Some Pennies For Those Rainy Days | | | | |