Debt consolidators provide services that enable people to lower their amount of indebtedness and gives them an easier way to pay off their debt, because it gives them a lower monthly payment. At least, that is what the claims are. Here are some things that you may want to consider before using debt consolidators.
The idea behind their services is that the debt consolidation company promises to reduce your indebtedness by 40 to 70%. They will do this by talking with your creditors and getting them to reduce your debt. For their services, you may pay as much as 20 percent of the debt, which often needs to be paid up front.
Using settlement services, however, has proved to be very detrimental for some people. Some people have discovered to their surprise that they did not get all that they were promised. Instead, many of these companies, which can spring up almost overnight, are often taking people's money without fulfilling their promises – leaving their clients with worse credit and just as much in debt – minus the fee that was paid.
MP Dunleavey, at MoneyCentral.MSN.com, says that some of these agencies even make late payments for you, hurting your credit even more. She also asks the rhetorical question: "Is it worth paying someone else to do what you can do on your own? That is, negotiate lower interest rates and stretch out your repayment schedule and pay off the highest-interest debts first? I don't think so."