Debt Reduction Services

What Is A Debt Reduction Service?

A debt reduction service company specializes in working with a person’s creditors to reduce interest and service charges. While this is convenient, most people can do the same thing for themselves and save even more money by avoiding the fees associated with these companies.

Charges

A debt reduction service company will usually start by speaking with your creditors and negotiating for a reduction in total charges owed them. You then make a monthly payment to the service company and they in turn pay your creditors.

This payment amount is the total of monies owed to your creditors and a service fee to the debt reduction service company. Their fee is usually the dollar amount that they have saved for you through their negotiations with your creditors. You could save that fee by doing your own negotiations.

While debt reduction service providers have relationships with many financial institutions and credit card companies, you too have a relationship with your creditors and can negotiate your own deal. Doing your own negotiating will also allow you to get the deal that is best for your circumstances rather than concentrating only on the lowest monthly payment possible.

You should be able to work with your creditors to make a deal that is not only great for you but that also may prevent damage to your credit score. Remember, the credit counselor is negotiating for the highest fee for themselves; you are negotiating for the most advantageous deal that meets your needs.

Are Debt Reduction Services A Scam?

Most are not; they offer a valuable service for many people without negotiating skills and expect to be paid for that service. Unfortunately, they bill monthly for a service that was performed only one time and that could wind up costing you quite a bit of money.

So it is up to you to do your research before signing up with one. While most are very helpful, you have to monitor them closely to be sure that your payments are being made in a timely fashion. Don’t be afraid to ask a lot of questions and carefully read everything you are asked to sign and make sure you understand all the terms and conditions.

If you work regularly with a bank or other financial institution, check with them to see if they offer debt reduction services. There is a very real possibility that they will be able to not only help you reduce your overall debt, but actually improve your credit score.