For Profit....

Q: A friend of mine has some credit card debt (imo - very significant) with some very high rate cards. I want to suggest a debt consolidation company to them but I don't know enough about them and which one I should suggest. Does anyone have any first hand experience that they could offer on this subject? I looked at a few internet sites and it seems they add in charges (like $39) to the monthly fee. Now, I know they still may be able to help, but I'd like to get a lower number than that. Also, any advice on things to watch out for or alternate solutions would be greatly appreciated.

A: There are two types of debt consolidation agencies, non-profit and for profit. The non-profit ones are almost always funded by the credit card companies. They

act in the interest of the credit card companies to maximize what they get paid back. Plus, if you register with them, you get a black mark on your credit that is just about as bad as a bankruptcy. Any consolidation you try to do after that will be nearly impossible. But these companies can help some people. The for profit companies are almost always a scam, and usually you should stay away from them. The best advice for your friend is to spend less than he earns, and use the difference to pay off debt. If he sets aside 25% of his income to debt service, and still cannot pay off the debt in 3 to 5 years, then he is bankrupt, and should file and get it over with.