Debt management & cost

Credit counselors and debt management services are designed to save people money. These services may charge a one-time enrollment fee and a basic monthly service fee depending on the amount of debt and number of accounts. These fees are insignificant when compared to the overall savings a debt management services can potentially provide. Savings are achieved through the process of re-aging accounts, thus eliminating expensive late fees, and with reduced or stopped interest charges. Also, once enrolled in a program, you usually need only draft one check each month, reducing cost of checks, money orders, envelops, stamps and other miscellaneous expenses. In that each client has a different mix of creditors and debt structure, the actual savings vary among clients. For our typical client, however, these savings greatly exceed service fees. Over time, from enrollment to liquidation, a debt management program can save clients thousands of dollars.

Most debt counseling services offer an initial free financial analysis. They will analyze your debt and offer a proposal as to how their company can help you.

Many credit counseling services are non-profit organizations. As a non-profit charitable organization the major cost for their debt management services are voluntarily funded and supported by participating creditors. Some (not all) creditors will donate a small percentage of each payment to the agency. Creditors contribute because the credit counseling organizations are assisting their clients to better manage their financial affairs, thereby allowing clients to continue fulfilling their obligation of making monthly payments, and thus, the creditor avoids expensive collection cost and legal expenses. Many counseling companies are an IRS designated 501(c)(3) non-profit charitable organization. In this case, donations that a creditor grants to the organization are tax deductible. Bear in mind that while some creditors donate a percentage of each payment to the organization, the client is credited the full amount of their payment. While a credit counseling service is always working in the best interest of the client, the program is a win-win-win situation, where all parties, the credit counseling organization, the creditor and the client all benefit.

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