Have you ever seen the very promising commercials that claim they can immediately reduce your debt and help you pay it off very quickly - they also call themselves a "non-profit.
" When you first see it, you probably think, "WOW! Free help to get my debts paid off? That's amazing! I'll take it!" Although I'm not saying that these services are bad, but there is more to them than that, yes there is a catch.
First of all, just because it's a non-profit does not mean that they are free.
All that means is that the organization does not declare a profit off of the money it collects from you.
It most likely uses that money to grow, help more people, reduce their fees, etc...
Now, there are such things are "free" services as well, but just because they are not charging you does not mean they are not getting paid - remember, they have high costs and they need to recuperate them one way or the other.
Here is how the two make their money: 1.
PAID services - Well, they directly charge you a fee for their services.
2.
FREE services - These companies work a deal out with the person who's debt you're paying off to get a certain percentage of what you pay off.
This may mean that you get a smaller discount on your loans...
See, one of the first ways that these companies really help is that they call (individually) the various places that you owe money and negotiate a decrease.
Companies realize that you may not pay them back at all (especially if you declare bankruptcy) so it is in their interest to try to get whatever they can out of you.
Many times these organizations will arrange for you to get a 50% pay-off! So, the organizations that are "free of charge" to you may be taking a certain percentage of that - so YOU'RE still paying for it!