Debt Advice Free – When the "Free" Part is Important and When it Is Not!

Getting your debt advice free would seem to to be a universally good idea. In fact, that’s why it is the title of this blog. I cannot stand the idea of people making money from the desperate without any guarantee that they will resolve your situation. In fact, if you take on a company that charge you upfront for their debt advice and they don’t provide you with a solution then they have just made the situation much worse for you/

What do I mean by debt advice free?

The important point is that the company that you are dealing with should only charge money for their service once the solution that they are proposing has been agreed by the creditors (people that you owe money to). I have no problem with companies/individuals making money if they actually resolve your debt problems but they should not charge you a penny for any work they do up until that point. Most forms of debt solution will have some companies/organisations that either will arrange it completely free (in the case of charities) or will only charge you once the solution is approved. The really good companies will then take the charges over the lifetime of the agreement so that they are more or less invisible to you.

So should you always use a charity/non-charging organisation to resolve your debt problems?

This is where the situation gets slightly more complicated. Your primary objective should be to get a debt solution agreed with your creditors. This may depend more on the reputation that the company organising your debt solution has with your creditors than it does to do with the amount of money that the creditor receives.

Frequently the charge for the debt solution comes out of the money that the creditors receive, that is if you had not been paying it for the debt solution it would have gone to the creditors so whether it is free or not at this point makes no difference to you.

Whether in fact it makes any difference to you depends on the type of debt solution being proposed. This part of the post relates specifically to England and Wales in the United Kingdom but there are probably some general points for readers from other countries:

Debt Management Plans – In this case you would be better off (if you can) getting your DMP from a free provider. This is because in a DMP you actually pay off everything you owe to your creditors. You probably won’t be any worse off each month if your DMP provider charges a fee, but the plan will go on for longer as the debt management company will be extracting their fee from the monthly payment that you make.

Individual Voluntary Agreements (IVAs) and Full and Final Offers – for these debt solutions it really doesn’t matter that much whether your debt solution comes with a fee or not since it will come out of the amount that is to be paid to the creditors (or should do). Therefore the important thing is to select a company with a good record of getting debt solutions agreed (if possible with the creditors that you owe money to)

Tags: Debt Advice, debt assistance, Debt Problems, Debt Solutions