Are “free” Debt Management Companies Really Free?

We all know that you can’t get something for nothing. That being the case, research shows that the credit industry is made up of the people you owe money to (your creditors). These creditors pay large sums of money into funds for “Free” debt management companies. The Money Advice Trust have written a handy list of all the creditors that pay into these funds. The list includes names such as Barclaycard, HBOS, MBNA and Northern Rock. Yes, that’s right – the free debt management companies are funded by the people you owe money to!

Fee charging debt management companies such as MRA Debt Help , Gregory Pennington or Abacus are funded by you, the client. This means that MRA Debt Help will work for you – not the creditors. MRA Debt Help are focused on getting the best possible outcome for our clients. You really matter to us, we will work tirelessly to ensure that your creditors agree to the offer of payment that you can afford. We negotiate your financial situation with the creditor to make sure that you can get your life back on track.

Free debt management companies may not necessarily want to ‘rock the boat’ with your creditors when they are negotiating your lower monthly payments. The amount of funding received by them from the credit industry represents a serious conflict of interest that could see clients being offered less of a discount than with a fee charging company.

Independent fee charging debt management companies can offer clients services, which would seem alien to a free debt management company. Our debt counsellors will negotiate lower monthly repayments and early settlement figures to get you out of debt as quickly as possible. It is not in the creditor’s best interest for a free debt management company to negotiate early settlement figures of 40-50%!

Don’t be fooled by the charitable status of many free debt management companies. Becoming a registered charity offers some enviable tax benefits, as well as giving the impression of being a morally sound company.

An MRA Debt Help client will typically pay 1.756% of their debt per year in fees. A typical MRA client will potentially pay off their debt after 3 years!

Our debt counselling negotiators aim to have all interest and charges set aside on outstanding accounts, which can lead to clients being in a position to potentially offer a full and final settlement of the full debt within two to three years. These settlement figures can be as low as 40% of the current balance – and some have been even lower than that!

By: Mike Robertson

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MRA Debt Help have written a handy comparison between fee charging and free debt management companies to show you how much you could save. For more detail about Debt Help here.