How Do You Use A Debt Management Program Service?

How does a Debt Management Program service work and what do they do?

As you may have already read from other pages on my site, I'm not a huge fan of most of the debt management program services on offer. There are several reasons for this.

Firstly, the majority of the programs I have been able to find take over your debts for you, negotiating on your behalf and leaving you with much smaller payments. Many times, this kind of procedure will put you into default with the lenders. Though technically the loan is 'reduced' and your monthly payments are much lower, the damage to your credit rating / score can be massive.

This damage can make it impossible for you to obtain a loan, mortgage, bank account, credit card or any sort of finance for years. Right now, that may sound just fine. You lowered your bills and then will have to sit out the punishment. However, when in five or seven years time you are still unable to open a new bank account or get a mortgage to move house, you might not be so pleased with the outcome.

My dislike for these stems from my days in the UK mortgage market where I would often meet people who had their debts 'negotiated' in this manner for them and then had to suffer for several years after. Almost all of those people I met said the same two things to me: that they didn't realise (or it wasn't explained) what would happen until it was too late and that they virtually all wished they hadn't done it!

Many of these services operate in small unregulated or under-regulated niches in the debt market. That doesn't mean that they are dishonest or illegal, though some will be, but that is really the situation in every market on earth. There will always be some illegal operators.

So, be sure to check carefully that you understand what will and won't happen before you use any debt management program service and ask all the questions that you feel you need to know answers too. There are lots of operators in this sector, so if you aren't happy with your provider, find another. However, bear in mind that you need to make the decision about who to use at the start - it is too late to change your mind midway.