What Are Reasonable Debt Management Fees?

How much are you likely to pay in debt management fees?

The answer to this question will clearly depend upon who is assisting you with you finances. A key point to remember is that everyone has bills and a mortgage to pay and kids to feed, so it is highly unlikely that you will be getting help from an expert for free.

It may be that you can get low cost help from some sort of nonprofit group or association, but very unlikely that the assistance will be free. These low cost options will generally charge you minimal amounts for their time and admin costs but little else.

The problem is that whilst an individual or family has debt problems, it is unusual that they can afford to pay any fee, no matter how small.

Of course, there are groups and companies that charge debt management fees that are much higher. In these cases, it is important to read the small print in your contract before you sign up for their service.

Many of these services actually make the bulk of their money through the deposit you pay. The actual fee level probably will not be that high, but they will charge a deposit (or retainer) upfront. This deposit is often equivalent to one month of your debt and loan repayments, so not necessarily small.

The deposit is returned to you when you complete their course and they have helped you as much as they can. Unfortunately, many of these firms will then not offer you enough admin help or general advice, education and assistance.

The companies know that a high percentage of clients will not complete the system and therefore the deposit will be forfeited. As clients drop out, they are paid the bulk of their fee. It is simply a numbers game.

Of course, many firms will be far more ethical about the way they charge debt management fees and the skill (for you) will be in choosing between the good and the bad. Hopefully, some of the information on this site will help you to do that.