A debt management company has the prime purpose to help debt laden individuals or business find their way out of debt. Rather than just extend more credit to the consumer; however, the company instead offers services that enables the consumer to consolidate all outstanding debts into a single, more comfortable payment amount that can be easily managed in installments.

Debt management and consolidation opportunities are well suited options for businesses that find themselves on the verge of filing bankruptcy. A common ratio that is seen as the warning point is when more than 40% of the after-tax income is being used to repay debts. Anything above the 40% mark is often seen as unmanageable.

Professional debt management companies have experienced counselors who are trained to take a good, hard look at your income, your expenses, and your spending habits and advise you as to what needs to be done. They are also able to negotiate with your creditors in order to arrange for additional items on your behalf such as lower interest rates, longer repayment periods, etc. Your credit counselor will even talk go the unpleasant and often rude representatives of any collection agents that may have been hassling you. This, in and of itself, is a blessing.

When selecting a debt management company, keep in mind that there are several different types. Some are for-profit and others are not-for-profit. The for-profit organizations charge a somewhat heft fee but almost always provide excellent, high quality services. Not-for-profit agencies often are paid through government funding and grants and therefore may be overworked and backlogged. Selecting a firm of either type should be a major decision for you and you should do some research to find the best possible alternative to assist you in your situation. One thing to look at when selecting an agency is how often they pay the creditors on your behalf. If they pay weekly or frequently you will get lower interest rates and no late fees. If they don't pay out regularly, there may be some financial instability or a lack of reserve funds. These are big warning signs to you as a consumer and you should probably put your trust and monies elsewhere.

Beyond hiring an agency, however, there are some simple do it yourself debt management solutions you can try. Here are some suggestions:

- First of all find a way to manage credit card debt. For example, replace your credit card with a debit card. By limiting your spending to money you have in hand (or bank) you alleviate the interest rate which equates to money in your pocket. Most consumer debt is acquired through the use of credit cards. If you are uncertain about a debit card, trade the credit card in for the old fashioned and very hard earned cash. If you don't see yourself losing the credit card or gaining the debit card, you should, at the very least, find the lowest interest rate card you can and transfer your balances over.

- Additionally, if you own a home, consider taking out a home equity loan to pay off the debts. Generally any interest rate a home equity loan would have would be much less than the interest rate on a credit card and thus it is again, a way to ultimately save money. Keep in mind, however, that if you continue with the wreckless spending habits, the home is now collateral on the loan and you could wind up losing it if you default on the loan.

- Consider whether or not you should consolidate debt. Taking out a debt consolidation loan to move all your debts into one loan and minimize your exposure and payments. The interest will be less on the consolidation loan than the cumulative amount it would be between the other debts which would result in a significant savings to you over time.

- Consider selling items you no longer use or need. Extra income generated through any types of sales could be placed toward your outstanding debts.

Any of these debt management solutions will help make a difference in a personal or small business financial plan and will assist in making you debt free and worry free before you know it.