OVERVIEW
Debt management or debt settlement companies can often save you time and trouble when it comes to debt consolidation. A benefit of using a debt management company is the ease of the transition from having many, smaller debts to having one larger one. That being said you need to closely review any company you plan to work with to ensure that they are doing what you agree to.

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The process of debt consolidation can be tricky and intimidating and often not something for you to try, if you are not financially savvy. Debt management or debt settlement companies can often save you time and trouble when it comes to debt consolidation. A benefit of using a debt management company is the ease of the transition from having many, smaller debts to having one larger one. A debt settlement company will take over paying all your creditors. You have to make one simple payment every month.

The idea of debt consolidation is simple. The many smaller debts you carry are covered by one large loan. These are typically unsecured loans such as credit cards, personal loans, store credit cards, and bank overdrafts. The benefits of debt consolidation are that that you can negotiate one interest rate for this loan and you can negotiate the amount of the payment. Often, during the negotiation process, you can often reduce the amount of the debt.

Pros of Debt Settlement
• Avoid bankruptcy – By using a debt management company to consolidate your debt, you will can reduce your debt burden and pay off your bills more comfortably. You can protect assets, such as your car and your home, using debt settlement.
• Make One Easy Payment – You will make one payment to consolidate your debt each month to the debt management company. They will disperse the funds to the creditors. This one payment on your consolidated debt simplifies your bill paying enormously.
• Avoid Harassment – Debt collectors are notorious for their ruthless tactics. A debt management company eliminates a debt collector’s ability to hound you for payment on your consolidated debt.
• Avoid Lawsuit – Debt settlement companies can help you get a hold of your consolidated debts and get them settled in reasonable manner. This can help eliminate the possibility of a lawsuit against you.

Cons
• Debt consolidation negatively affects your credit score.
• During debt settlement, some of your accounts will get charged off. Debt consolidation can negatively impact your credit score. Debt consolidation can be repaired through time and careful use of credit in the future.
• Fees
• Some unscrupulous debt management companies will charge exorbitant fees for their services. Often, you will be asked to pay a percentage of your monthly payment to the debt settlement company in fees.

Points to remember:
• Choose a reputable non-profit debt management agency for debt consolidation. Make sure you toughly investigate the company you decide to use. You need to make sure you choose your debt management company wisely.
• Learn the fee structure for debt consolidation up front.
• Before you agree to a debt management plan, understand the impact this will have on your credit rating.
• Stop using your credit while you’re trying to repair your debt. Create a budget and stick to it.

Related Articles:

• How to Choose a Debt Management Company (Super Pages)
• Debt Help that isn’t (Bankrate)
• Debt Management Company Watch Outs (About.com)
• Your 3 worst debt consolidation moves (MSN)
• The Perils of Debt Management Companies (Find Law)

Examples of Debt Management Companies:

• Debt Consolidation Care
• Credit Counselors
• CareOne