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