Consumer debt is debt individuals accept as a means of purchasing something for personal use without immediately paying the full price. They may do so by securing a loan or using a credit card. Many Americans manage to keep their consumer debt within manageable levels, but some, either due to negligence or catastrophic events, lose control of their ability to pay their debts. In these cases, consumer debt relief programs can help.
Types of Consumer Debt Relief Organizations
The main distinction between consumer debt-relief organizations is whether they are nonprofit or for-profit. Nonprofit organizations provide counseling and resources for the purpose of helping people in need without generating a profit for company owners. For-profit organizations are companies that provide similar services for a fee, paying substantial salaries to counselors and sales professionals and earning profits for owners. Both types of organizations can sometimes help people with debt problems.
Debt Relief Methods
The first thing a legitimate debt-relief counselor will do is look at a consumer's income, debt burden and necessary expenses and determine whether he is able to pay off his debts by carefully budgeting his money and reorganizing his priorities. If this proves ineffective, either the counselor or the consumer may be able to renegotiate the interest rates for various outstanding debts, thus lowering debt payments. If both of these fail, consumers may be able to benefit by getting a debt consolidation loan, which pools their debts into one account with a low minimum payment.
Business Ethics of Debt Relief Programs
According to the Federal Trade Commission, a significant number of consumer debt-relief programs are scams that take money from needy people and give them little or no actual help with their debts. If you are considering getting help from such a company, remember a company can never guarantee that it will lower your interest rates by consulting with your creditors. Also remember that you are just as capable of making a deal with your creditors as a debt counselor is. Before paying anyone to help you with your debts, research the company through the Better Business Bureau and other third-party review organizations to determine how often they satisfy their clients' needs. Do this even if the organization claims to be nonprofit.
Debt Consolidation
Whether or not you consult a consumer debt-relief program, debt consolidation may be something that can help you with your debt burden. By getting a debt-consolidation loan, you may be able to get a third party to pay off various debts and start a new payment plan. With a legitimate debt-consolidation program, this new payment plan will consist of lower recurring payments. However, you will probably have to make more total recurring payments, thus increasing the total amount of money you pay in interest. Many debt-consolidation firms can offer legitimate help, but they do make a considerable long-term profit by doing so.
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