Debt Counseling Services

They call themselves debt counseling services, debt consolidators, credit counseling services, and a variety of other names. They tout the fact that they are non-profit organizations. I pose a mystery. See if you can solve it. How can organizations that receive no profit afford to advertise so aggressively in expensive national advertising campaigns on radio and television? One ad I saw the other day mentioned that their organization has helped 2 million people. Why do these organizations spend so much money and fight so hard to recruit new clients in such vast numbers when they make no profit from them? Why are there so many of these servants of the debt oppressed? Was there an explosion of conscience all over the United States at the same time?

“Dear, I had a vision last night. God told me to set up an organization and help people who are loaded down with debt. And dear, I am going to do it for free!” This same vision seems to have been given to hundreds of people who have started “non-profit” organizations all over the country. Are they just so civic minded, so tender hearted in their regard for these poor downtrodden souls burdened with debt, that they are just seeking people to serve out of love? What is going on here?

You can set up a non-profit organization and pay yourself a salary for the job you do for the entity. The entity itself is truly, technically, and legally non-profit, but you personally can receive a financial benefit from the work you do for it. That is what is going on here. Your salary and any other remuneration you receive appear on an income statement or its equivalent as an expense, as does the salary of a spouse, a child, another relative, a friend, or an actual real live employee. The revenue coming in is zeroed out by the expenses paid out and part of these expenses are salaries and other compensation. There are individuals within the entity who benefit financially, but the organization itself shows a zero profit at the end of the fiscal period. That is what is going on here. Now, am I saying this is a sinister, money-grubbing ploy and plot at work? No, there are some in these organizations who truly feel they are helping people. There is nothing wrong with benefiting financially from helping someone as long as all parties go into the arrangement with their eyes open and know what is going on.

What are these organizations doing? Inherent momentum, that is what they are doing. Go and look at the description of inherent momentum, a few posts back in this same blog, and then watch one of the television ads and you will see it. They say you make one convenient monthly payment to them. That is the “block payment” we looked at earlier. These guys are running an inherent momentum version of the debt destruction engine. When you get involved with one of these programs, it is mentioned on your credit history and this prevents you from taking on any new debt. There are two essential ingredients to the successful operation of an inherent momentum version of the debt destruction engine. The first one is faithfully making that block payment every month and applying it as I described earlier. The second necessary component is not taking on one penny of new debt. You cannot take on any more debt because you are hooked up with these folks. They are doing what you could do yourself with inherent momentum.

They negotiate to get some of the interest rates lowered and sometimes to stop late fees and over limit fees, but even if they did not do this, inherent momentum would still by itself take the total debt down to zero. Their version of inherent momentum might, in some cases, work a little faster than the version you would create because of these negotiated lower interest rates. You, of course, could just write or call the creditor yourself and ask for a lower interest rate. They might say yes. The worst they can do is say no. Imagine that you start with one of these debt counselors with a block payment of $1,300. The total of all the required payments comes to this block payment of $1,300. After a year, the total of all the required monthly payments is down to, let us say, $1,050. Take the $1,300 you are still paying every month and subtract $1,050 from it and you get $250. There are programs that “give” you a piddling check every few months. Of course! There is $250 available every month in the example just given. They can peel off part of this difference to “give” you a few nickels and dimes, a part for operating revenue (to cover expenses including salaries), and still drive the debt down to nothing with the part left. This difference between the block payment and the total of all required payments grows larger over time.

The debt counselors also say, “Later, if you need to pay less than you started paying at the beginning, that can be arranged to help you out.” Of course, they can do this “to help you out” because the total amount of all balances drops over time. With inherent momentum, you can do the same thing. After that total amount due drops $250, you can drop the block payment by $100 or $150 to relieve some of the pressure on yourself. If you do this, your debt destruction engine will take longer to destroy all of the debt, but this is an option available to you. You can avail yourself of this option without using a debt counseling service.

The credit counselor is renting office space, paying utilities, paying phone bills, and salaries. The money for this has to be coming from somewhere. You know they have to either peel off part of this difference for revenue, in the form perhaps of “fees,” or they are getting some kind of a percentage-based payment from the creditor like that received by the Consumer Credit Counseling Service.

http://www.FaithLifeNow.com Get started on your own personalized, complimentary plan to find money and achieve your financial goals. 90% of families can be out of debt, including their mortgage, in 5 to 7 years. I am not associated with these folks in any way, financially or otherwise. I receive no affiliate or referral income for sending you to them. These are just good, solid folks who will help you to be liberated from debt.

Tags: Debt Destruction, Financial Planning, Wealth Building