Debt consolidation companies typically provide some form of debt counseling services and a plan to consolidate debt by offering either a secured or an unsecured loan. Alternatively, a debt management plan can include the company negotiating directly with an individual's creditors to establish lower repayment rates or to reduce amounts owed. The debtor (or consumer) pays monthly fees to the debt consolidation company for these services.

Debt consolidation companies can be either for-profit or non profit. The Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling (NFCC) accredit debt management companies. http://www.expertlaw.com/library/finance/debt_management.html

Many companies in the debt consolidation and debt management industry have fallen into legal pitfalls with the IRS and Federal Trade Commission over the past few decades.http://www.creditinfocenter.com/debt/DebtConsolCompanies.shtml As a protection for consumers, the local Better Business Bureau (BBB) or a State's Attorney General's Office will have information on any business that may have violated regulations.

In addition, the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling (NFCC) provide accreditation for debt management companies. http://www.expertlaw.com/library/finance/debt_management.html

The main distinction between debt consolidation companies is that some are non profit and some are for-profit. Certain non-profit debt management companies have religious affiliations.

Non-profit debt consolidation companies are funded in part by the government (grants), creditors and donations.http://money.howstuffworks.com/personal-finance/debt-management/non-profit-debt-consolidation.htm Their fees are typically lower as a result. For-profit debt consolidation companies provide the same services like, debt counseling, debt management programs (DMP) and debt consolidation loans for a negotiated fee.

Debt consolidation companies and can assist debtors with the management and reduction of outstanding debt such as student loans, home loans, credit card balances and medical expenses. Debt counseling and workshops at these organizations can provide further education to consumers.

The content of this page is not a substitute for financial advice. Please contact your financial adviser before using the information presented here.