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Why Free Debt Consolidation Services Are Free

Jun 5, 2008
Finding yourself stuck in numerous debts will lead you to either of two things: give up and declare bankruptcy or struggle and seek help. The first is easy and depressing, the latter easier and promising. Why easier?

With the recent advent of free debt consolidation services, managing your unpaid debts is no longer a tough act. There are now entities offering help and professional advice on how to handle and pay off your debts without a fee.

Here, an agent or a professional credit advisor studies your financial situation. This includes asking you questions, getting your financial documentations such as credit card statements and working out a plan to make you eventually debt free.

His services may also include negotiations with your creditors to lower down interest rates or extend payment period for a reduced monthly payment. In a nutshell, free debt consolidation services are the answer to your financial woes.

However, these days, when the word free is attached to anything, especially when that anything is merchandise, probably a gadget or anything of value, there is usually that 'Is this really free?' question reeling in your head. I mean, what is the catch?

In relation to debt consolidation services, how do companies afford to offer this for free? There is no question if you get the service from non-profit organizations like your church or some for-a-cause groups in your local municipality. But this kind of services is more popular in the Net. The Internet provides plentiful choices for consolidation services, most of them advertising effectiveness, cheap rates or most of the time, a no-cost deal. This paves the way for questions such as 'Are they genuine?' or 'Is this a scam?'

To better understand how free debt consolidation services work and to further erase doubts, one should be aware of how these companies and lending institutions come up with the money to provide you with the help you need. Do they even spend at all? What are the costs that come out of their pocket and at whose expense? How do they get it back?

They Negotiate

A debt consolidation service provider negotiates with your creditors to lower interest rates or forego late payment penalty fees.

The Difference

The difference between getting a debt consolidation loan and a debt consolidation services is obvious. The latter does not actually give you a loan. It only helps you get rid of all your loans. What these service providers do is that upon receiving your monthly payment, they distribute this to all your creditors based on the terms they have agreed upon. They do not initially pay back all your loans for you, thus they cannot charge you with interest.

It is Not Really Free

They do not really give it for free, but only on their point of view! Service providers take out a certain percentage from the monthly fee you give them. You do not see this though because they declared to you a monthly payment that is already inclusive of their fees. However, since the sum of your total monthly dues is still lower compared to your original debt, it is still a win-win situation for you!

Passing on your debt problems to service providers is only the beginning. After that, it is still on you to maintain your debt-free situation or spend worthlessly. Following your credit advisors suggestions so as not to fall into the traps of debt again may be the next step.
About the Author
Zulika van Heerden provides valuable information on her site on how to
live a debt free life.
To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za
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