Almost every debt management company charges an upfront fee, commonly known as administration fee, which is equal to debtor’s first minimum monthly payment amount. Later the debt management program fee is around 15% of every month’s repayment amount. Hence, it’s as appropriate to say that these companies receive a huge chunk of debtor’s money. These companies will inform the debtor about all the benefits they will receive after signing up for a debt management program. However, they wouldn’t disclose the amount of money they will eventually receive as debt management program fees.
Sometimes, a debtor feels, after joining a debt management program, that bankruptcy would have been a better option. This is because much part of debtor’s money is pocketed by debt management companies, which otherwise could have been used to repay the outstanding amount.
Being a commercial organization, debt management companies do have the right to earn profits. However, sucking debtor’s every penny isn’t ethical. They charge an upfront amount merely because they came up with a debt management plan. Later, they charge around 10-15% every month as debt management program fees and they the only service they provide is talking with creditors to reduce debtor’s interest rates.
In many cases, these debt management companies compels debtor to make a larger payment every month. No, they aren’t bothered about your repayment vision. They do this because they get a hefty commission. A better option is finding a genuine non-profit debt management company. They do charge debt management program fees, but it is comparatively much lower. And the money they earn is used to manage office expenses, salary paid to creditors, and other expenses. They don’t earn profit by exploiting debtor’s financial situation. Hence they are known as non-profit organizations.
Best option to repay your debt is finding a company that doesn’t charge any debt management program fees. There are few government agencies that offer these services without any cost. They don’t charge any upfront amount nor do they seek commission. Hence, every penny you pay goes directly to the creditor, which helps you to repay your debts faster. |
