My sister asked for my advice & I haven't a clue although I asked what's the catch with these companies.

Any one had some experience dealing with them & do they really help or will it cost you more at the end?

Thanks guys.

No experience, but any loan to cover all your debts with a low monthly repayment is going to take a very long time to repay.

There is a very real danger that someone who has racked up the debts to use on of these companies will not change their spending habits and continue to take credit over the years that this loan is being paid off.

What you have to realise is that you cannot ever go back to spending how you did, otherwise you will get yourself into trouble all over again and you will still have to payback the original loan from the debt management company.

I suggest some debt counselling before considering what to do if you've got into a financial mess. Start with the citizens advice bureau and they will point you in the right direction.

Remember, these companies always quote 'homeowner loans' for a reason. You default and you could lose your home - they need that security.

queenstomper, not all of these companies rely on you having a home. Debt Free Direct, Cleardebt and Accuma don't as far as I am aware. Their advice is free too.

Any advisors which are companies will eventually charge you, regardless of how much 'free' advice they intially offer. If you have a serious debt problem Citizens Advice is the first port of call and they will give you details of charities who will assist you. Such charities make no charge for their services.

I have only looked at Accuma and it clearly states on the first page that consolidation loans are secured against your home.

Here's what the CAB say:

http://www.adviceguide.org.uk/index/life/debt/help_with_debt.htm

Citizens advice and the Debt Counselling Service are charitable organisations, so no charge.

Any other company is in it for a reason, mega bucks! Of course they make money, they don't do it for social responsibility reasons!

It will cost more in the long run, considerably more.

Carol Vorderman, Phil Tuffnel and whoever else does adverts for these companies offering loans should be thoroughly ashamed of themselves.

Yes Queenstomper, they should.

On an investigative programme on BBC1, they got a response from Ms Vordemanns company, who said they lent responsibly, and had never repossessed a customer all the time they had been in business. What they didn't say was that they take what is called a 2nd charge on the property when the arrange these large debt busting loans, and because they are only 2nd charge holders, they CANNOT reppossess. They have to apply to the 1st charge holder, normally the Bank, and ask them to do it for them! So the Banks look bad, when in reality it is these rip off companies lending poor people vast sums of money and getting someone else to do their dirty work for them.

The last thing they want to do is repossess, because as you say whoever has the first charge gets first dibs anyway. I wonder how many customers have got in to difficulty and then entered into a restructuring deal with thier loan companies which reduces the outlay, but lasts for even longer?

Sometimes it is better to understand things before passing comment.

[LIST]Consolidation Loans are cheaper than re-mortgaging (no surveys; lawyers fees; no mortgage fees etc) Factor these fees into a 5 year loan and you will see that a competitively priced consolidation loan is much cheaper.

[LIST]Debt management companies- some charge others don't DYOR. However the downside of DMC is that they are in the business selling repayment plans which might not suit your specific needs. It may be worth considering and IVA or Trust Deed(Scottish) Three years sorting out your financial affairs and 6 years (max) to clear your credit reference history. In 9 years you could have a financial clean slate. But some DMCs might not tell you that.

[LIST]The CAB do a great job but they are under resourced, overstretched and some people don't want to get advice from some one local in there community.

There are only 4 routes to alleviate your problem bankruptcy; IVA/Trust Deed; refinancing; and debt managements plan. In essence there are no easy solutions to debt problems. To rule out one avenue because of bad press or uniformed opinion is to exclude the possible solutions to your problems by a quarter.

The best (IMHO) company to get you out of your debt problem is newtomorrow who offer holistic, free and confidential debt advice. Give them a phone 0800 678 1234.

Respectfully gingersilverflash, this is a forum and is here for people to give opinions and as such there will be different advice coming from different sides.

Nobody on here has said 'avoid' but have offered their advice based on what they know about the subject.

Most people who come on here know that any advice given is personal opinion - that is why advertising is not allowed and anyone blatantly doing so will have their posts deleted.

Your post is also based on your own opinion so please don't assume that because you consider your way the best course of action that it is the best for everyone.

Nobody is ruling anything out, we've merely provided links and various information from what we can source to allow the OP to research further.

gingersilverflash, the term remortgaging is a bit misleading. You can release equity in your home by remortgaging. This does not mean changing lenders, employing lawyers or paying any fees. Your lender, if you have the equity available, will simply increase your mortgage, amend your payments according and give you the cash to do with as you will. So long as you can afford the repayments many lenders do this. People do this for work on the home, holidays, a new car. It's money they can free up in a very easy way.

A consolidation loan lugs all your debts together. Yes, it does indeed make things easy, but you need to think long and hard about the alternatives and about the company that you are going to use to do this for you.

I presume you are from Scotland so there many be different laws there but in England you cannot clear your credit reference history any sooner than 7 years.

Your right and I’m right about credit reference agencies. After 6 years.... is the seventh year. However, in reference to debt consolidation loans, there are at least 2 situations which do not fit with your account of re-mortgages.

Firstly the bank will only extend your mortgage to the index linked valuation of the property, which is likely to be a lot lower than the local market valuation. Therefore to release the true equity of the property you will have to go to the expense of a valuation. Fees for this are sometimes included by the mortgage company should you proceed with the loan all things going well. The majority of companies also charge an arrangement fee, something else to bear in mind.

Secondly, many people who have debt problems also are in arrears, defaults CCJ decrees. This could mean that their current mortgage provider may not want to extend their borrowing any further. Their only option (in terms of refinancing) is a consolidation loan.

I am not saying that consolidation loans are the solution, just a solution.

Finally I do agree with your Pierre De Beaumarchais. However, at some point you do have to understand the concepts in order to win the argument.

The OP didn't provide us with any details, just an interest in what the catch might be with these companies. It's just that the adverts you see on TV make them out to be a very easy, cheap, painless way of getting your creditors off your back, and most of us on this thread have recommended getting advice first. The CAB does have very sound advice and can direct you to places that they know are providing a debt service, complete with advice for no profit. Debt management companies have to gain their profits from somewhere.

The OP was asking about this aspect I presume, so it's very much dependant upon the actual circumstances of the person who has been looking to use one of these companies. Hence the type of advice we've given. You've merely provided a link to just one company who provides this kind of service.

As I said, we are offering our opinions, which is what the OP asked for. I do understand the concepts otherwise I would have kept my mouth shut.

So far as mortgages go you are only providing information from one side, the side that presumes you don't have enough equity to sort out non priority debts without incurring all sorts of charges. You give this advice making a presumption of what debts are held when none of us know that.

All I know is that these adverts offer consolidation loans, which to most means that their credit cards, bank loans etc. can all be paid from one place. I know if it were me those sorts of debts could easily be sorted out by releasing some equity. Those who are not homeowners will rarely be able to get these consolidation loans anyway, according to the CAB, and you cannot deny that their information is correct.

You're right again. The CAB is correct in that those who do not own a home cannot get consolidation loans secured on their home. But as I previously mentioned, those who have unsecured debt problems, eg £30k+, may find it difficult to cheaply release equity in their property.

In respect of fee charging DMC's, an argument can be made for the fees they charge. Free market place, nobody forces the debtor to use them. The problem is that agencies like CAB and the local councils are under resourced and overstretched and cannot meet the ever increasing demand on them. Hence the debtors use fee charging agencies. What if the CAB et al were fully resourced etc what impact would that have on our taxes? In any case debt management plans are a form of debt recovery and should public money be used to recover irresponsible lending and borrowing?

Some charity status debt advice companies are wholly funded by the financial institutions. It could be argued that it is in the debt advice companies’ interests to recommend debt management plans as this will recover the most for their backers or perhaps am I being too cynical.

I almost forgot about this thread but thanks to everyone who had contributed to it...appreciate all your comments.

My sister called Acuma & was told that they can't help her because she has large equity in her property that she can use to offset her debts which she has now taken up with their lender.

I did warn her though before she called that company to check if it'll affect her credit ratings or something but she forgot to ask.

Will it???

What just calling them? I wouldn't have thought so sunnyspell. Credit records hold things like any payments missed on loans/cards etc. along with any CCJs. I wouldn't have thought making an enquiry would matter at all.

Well, at least she is getting it sorted and hopefully she won't have to increase her mortgage too much in order to get it sorted.

That's what bugs me most when you see these adverts as people tend to see them and perhaps ring one of those before getting any other advice.

I agree with this.

And some debt management agencies are funded by the financial companies and so do not need to charge you a fee. They do this as it is in in their interest to get you paying back the debt!

quote:

Originally posted by stateofplay:
On an investigative programme on BBC1, they got a response from Ms Vordemanns company, who said they lent responsibly, and had never repossessed a customer all the time they had been in business. What they didn't say was that they take what is called a 2nd charge on the property when the arrange these large debt busting loans, and because they are only 2nd charge holders, they CANNOT reppossess. They have to apply to the 1st charge holder, normally the Bank, and ask them to do it for them! So the Banks look bad, when in reality it is these rip off companies lending poor people vast sums of money and getting someone else to do their dirty work for them.

Maybe far too late responding to this but just wanted to point out that this post is innacurate. Second charge companies can apply for repossession but as has correctly been pointed out they only get the second bite of the cherry after the first charge holder has taken what is owed to them. These days though with the large increases in property value there is usually more than enough to clear all charge holders.

It is also correct that First Plus have never repossessed anyone (even though they can).

Hi,
No one can guarantee you a service with free of cost.. but yes you can minimize the cost and get a quality service as long as you go for a reputated firm...

Do you mean consolidating your debts into one monthly payment?

Well i've heard both pros and cons and think it really depends on the company you go with and how desperate you are.

If you have other options remaining i'd recommend not consolidating your debts.

Debt Management Companies that require a monthly fee - AVOID!!!!!

Think about it... the fee that you are paying them you could be paying to the people you are i ndebt too.

For FREE help and advice you should contact either Payplan or CCCS. In my experience the vast majority of creditors will not have an issue with a repayment place done through these companies as they are so well known.