Companies that help manage debt?

Not that I'm in any thankfully or looking for one.

It's just I saw an advert for a 'debt helping' company, which seems to help you consolidate your payments, blah blah.

I don't know anything about these to be frank, but I can imagine them screwing someone over even more, and them making money, because why else would they exist?

Anyone know how these companies even make their money?

They put you on a debt management program, you provide a list of the companies you owe money and from that a payment is worked out which you pay to the debt management company. They then approach the companis with an offer of a small but regular monthly payment, the debt management company will keep a percentage of what you pay them so say, for example, you pay the DMC £100 a month they keep the first £20 and then divide the remaining £80 between your debtors.

[timwilky]

Not that I would touch them with a bargepole

They reschedule your debt, arrange repayment terms and charge a huge commission that they load onto your debt. You then pay them smaller amounts at huge interest for ever and a day. They make a fortune out of those silly enough to get into debt and too stupid not to do something about it themselves.

[maviczap]

Nice fat interest rate on the loan they give you to pay off all your other loans. But less than seperate loans combined

Tis not the way to do it either

Originally Posted by Speedy Claire

you pay the DMC £100 a month they keep the first £20 and then divide the remaining £80 between your debtors.

Thats madness. Why would anyone just pay someone to pay your debts for you. Get a thinking cap on and do it yourself. If you're in debt, you can't go spending money on something as ridiculous as having some basic maths done for you!

Now I know how they make their money. Thanks for info!

[maviczap]

There are plenty of stupid people out there who will go down this route, but then they're the type to buy everything on their credit cards in the first place. Buy now, think about paying for it later

Originally Posted by timwilky

Not that I would touch them with a bargepole

They reschedule your debt, arrange repayment terms and charge a huge commission that they load onto your debt. You then pay them smaller amounts at huge interest for ever and a day. They make a fortune out of those silly enough to get into debt and too stupid not to do something about it themselves.

I think that`s a bit harsh Tim.... sometimes people get into debt thru no fault of their own but just bad circumstances. Some people wouldn`t then know how to go about clearing it themselves or get advice on how to do it which lands them even further in debt.

IMO the debt management program can actually be a good thing if you choose a reputable company. A friend has recently enlisted the help of a company and thats where I get the above figures from. She pays £100 a month, they keep £20 then the rest is split amongst the 8 companies she owes money too, they have calculated her debt will be cleared in 4 years. She says the £20 is well worth it and she doesn`t mind paying because she now has peace of mind. Any letters she receives from her debtors are put straight into pre paid envelopes and directed to the debt management company, if she receives a phone call she doesn`t have to speak to them, just give them the number for the DMC.

I know some people might think £20 is a lot but she was out of her mind with worry... this arrangement suits her and leaves her stress free to spend quality time with her kids. She no longer has to fear opening the front door to bailiffs and she`s a few hundred pounds a month better off since making just the one payment to the DMC.

I understand the peace of mind aspect for some people, but they are taking a whopping 20% of her payments (maybe a tad less give or take the reduced interest they agreed with the other companies). That's still a pretty huge cut from payments made by someone whose in enough debt to have requested help.

Well they must make a killing out of it.

I think there`s a lot of very judgemental people on here. Some of us might be lucky and mature enough to not get into debt in the first place but as I said above sometimes the debt arrives on your doorstep through no fault of your own ie. thru ill health, divorce etc.

Years ago I was in the position my friend is in and I wish I`d gone down the road of a debt management company. I didn`t have the confidence to approach the companies I owed money to, got what I thought was good advice and that led to even more debt. I didn`t have credit cards, I didn`t have overdrafts, I didn`t have any holidays, I didn`t even have a car but what I did have was a very young child and a life as a single parent after my husband left. I not only had to try and manage with a monthly income that was more than halved after his departure but I also had to deal with all the debt that he`d unknown to be managed to accrue.

All I`m saying is don`t be too hasty to criticise others for debt... they might not have been as lucky in life and life choices as yourself but it doesn`t make them stupid.

Originally Posted by thulfi

I understand the peace of mind aspect for some people, but they are taking a whopping 20% of her payments (maybe a tad less give or take the reduced interest they agreed with the other companies). That's still a pretty huge cut from payments made by someone whose in enough debt to have requested help.

Well they must make a killing out of it.

I do understand what you`re saying and yes to an extent I agree that the companies are cashing in on peoples misfortune but I think peace of mind is well worth that 20% if it means you no longer have to worry and can start to enjoy life again