One of the first things people in debt do is hit the Internet in search of a company that can magically help them get out debt.
Do a Google search for “debt management companies” and about 118 million sites show up on the search.
You would think that with that many results, there has to be at least one debt management company that can help you, right?
In the debt world, debt management companies have a very bad reputation. Unfortunately, most of them are more known for preying on desperate individuals instead of actually helping them get out of debt.
They usually collect and upfront fee and advise the debtor to stop paying all debts while they negotiate the payments. During this negotiation phase, all of your cards and loans start to become delinquent and you watch your credit rating plummet.
There are horror stories from clients where they trusted these companies to handle their debts and they ended up in worse shape than when they started.
While there are certainly a few companies out there that are actually doing the right thing, it would seem a very risky proposition in which to get involved.
There are other alternatives from which you can choose.
Obviously, a debt consolidation loan is a possible answer. You are at least able to compare rates on your own and decide if the new payment and interest will benefit you over the current situation.
If it does, you can move forward, if not, there are still some things to do that can help you lower you overall monthly debt load.
Something we have recommended on here before is to actually call your current credit card companies to see if they will lower your interest rate.
If you have a loan that you have been paying for some time, the loan company may be willing to rework the payment structure as though the loan was just taken out.
This will lower your overall monthly payment without increasing your debt (other than the interest for the added years of the loan).