If you're like many of today's consumers and even close to being in over your head with to much outstanding debt then chances are good that you've probably heard of or have been approached by a debt reduction service. These organizations or individuals attempt to become a negotiator between yourself and the creditors that you owe money to or have a large amount of outstanding debt with. Although many people look to avoid their services they can be beneficial to consumers that have a large amount of debt spread amongst many different creditors.

Normally the way a debt reduction service works is where the debt-ridden consumer makes a monthly payment, which represents all of their debt payments consolidate into one big payment, to the debt reduction counselors. The counselors then take the payment and divvy it out to the creditors that are owed money. Many financial experts advocate that a debt reduction service is better suited for paying off credit card debt and other unsecured debts. Debts such as car or auto loans and home mortgages are better suited to be handled with a debt consolidation loan.

One of the benefits to using a debt reduction service is the opportunity to obtain lower interest rates on your debt. This is usually handled or negotiated by your debt reduction counselor. In some cases they are also successful enough to actually get some of your debt lowered or erased but the consequences of these actions could end up showing in a negative light on your credit report so just be cautious when discussing these types of debt reduction strategies and options.

Perhaps one of the biggest drawbacks to using a debt reduction service is the fact that they normally charge a commission for their debt reduction services. Generally this commission equates to roughly 10% of your normal monthly debt reduction payment. Because of this associated cost when hiring a debt reduction counselor you want to make sure you do your research and try and find a counselor that will adhere to ethical standards such as not spending the money you pay with the intent to repay your creditors.

For many consumers a debt reduction service can be seen as a legitimate method of repaying back the money you owe your creditors in order to avoid filing for bankruptcy. Still other consumers feel that the costs associated with hiring a debt reduction service and the small number of unethical cases and questionable tactics that are known to exist has relegated the debt reduction counselor to nothing more then an old time snake oil salesmen. Whether or not they and their debt reduction services can help you all depends on finding a counselor you can trust based on the initial research you perform.