Select Page

Nonprofit Debt Consolidation

Elizabeth Johnson

Financial Advisor
Updated: 01/2019

Nonprofit Debt Consolidation

What is Nonprofit Debt Consolidation?

In simpler terms, debt consolidation is a process by which a debtor amalgamates all his outstanding debts into one solitary monthly payment. Non-profit debt consolidation similarly, is the process by which the consolidation is done by a non-profit debt consolidating company, also called a non-profit credit consolidation company that works for the client’s benefit without prioritizing its own profits or commissions.


Advantages of Nonprofit Debt Consolidation

Any agency for credit counseling that works with a nonprofit motive offers its clients high quality services in terms of credit counseling as also customized solutions on debt relief that are best-suited to their individual financial conditions, more like a good Samaritan rather than for hefty commission or profits.

In fact, they are the direct opposites of many profit-oriented debt consolidation companies that offer products, advice, and services that work on improving their bottom lines rather than working in favor of the client.


How does Nonprofit Debt Consolidation Work?

The non-profit debt consolidation agency first makes a careful assessment of the client’s needs for debt relief, following which customized plans are prepared to address his financial problems by way of tax settlements, missing tax returns, student loans or overdue credit card payments. These companies usually have s informative websites containing articles, free resources, and tools that address and solve numerous debt-centric problems of their customers, no matter how grave the financial situation is.

By way of free consultations, advice is offered on debt reduction methods, consolidation of student loans, handling transactions pertaining to real estate and retirement planning by a team of highly trained and experienced CPAs and tax attorneys who work for these companies.

Usually, a debt specialist makes an assessment of the potential customer’s current debt burden and offers customized strategies and debt-reduction options through multiple service plans at either minimum cost or no cost at all. After all, the company’s objective is helping hapless people first and not filling its coffers.

It is through the guidance provided by a number of well-known and established non-profit debt consolidation agencies that thousands of satisfied customers have improved their credit scores and reports by gradually repaying their outstanding dues.

These had fallen earlier, leaving most customers with a bad credit history but have not only now improved but are being maintained also. Since loans and credit go together, these agencies also advise their clients how to establish good and sustained credit, repay loans faster and to also avoid getting into long-term debt in future.

Most of these agencies are staffed with a full team of highly trained and experienced representatives with proper credentials who are continuously and intensively trained to handle all debt situations including those related to bankruptcy. Through various debt management programs (DMP), these agencies consolidate a debtor’s payments into a single one, while also negotiating for lower interest rates on credit card outstanding on behalf of the client.

Additionally, the credit counselor may also help you ascertain whether you are liable to get aid from any federal housing program that lowers your monthly mortgage payment. You may have to pay a monthly fee ranging between $25 and $50 and your consolidated monthly payments get automatically debited from your account.

It is often said that plenty of fly-by-night and canny operators plague the debt relief industry. These take undue and often illegal advantage of those caught in a debt trap, leaving them further debt-ridden. On the flip side, non-profit debt consolidation companies, for instance, the NFCC credit counselors offer programs and advice keeping the client’s best interests as the topmost priority item.


Non-profit Programs for Debt Consolidation

The most viable nonprofit programs for debt consolidation guide you in a manner where you don’t require taking new loans. These programs are formulated after conducting a full-fledged credit counseling process. There are also facilities for credit counseling online or calling the non-profit debt consolidation agency to consult directly with a qualified and licensed credit counselor.

During this credit counseling session, the principal cause of the financial problem is identified, and a personal budget is worked out so that day-to-day-expenses can be taken care of while the debtor also starts saving to regain financial security for their future.

Debt Management Program:

A debt management program will concentrate on consolidating credit bills and converting them into one easy and affordable monthly payment; it will help you pay off the debt faster, usually within three to five years; lower interest rates irrespective of your credit score; stop calls from creditors for collection; eliminate over-limit and late fees charges; and, more importantly, construct a practical and realistic budget along with a financial plan that you can stick to easily.


Should the Debt Management Program fail to be the best relief solution for your card debts, you may also be advised to file for bankruptcy. The non-profit debt consolidation agency will advise you to consult the right bankruptcy attorney who may correctly guide you in the filing and disclosure and protection of assets procedures. These agencies also work in tandem with other non-profit organizations and governmental bodies that help you overcome or improve your financial situation. Thus, your case may be referred to these as well to get relief.

Debt Settlement Program

Debt settlement is in some ways similar to debt management. However, instead of negotiating the interest rate to make the monthly payments more affordable, they negotiate on your behalf to pay only a fraction of the total amount you owe. Therefore, if you feel that consolidating your debts, no matter how small the annual percentage rate, would not help you, this is the next best thing. Moreover, this can also be a viable option if your credit rating is not high enough for a debt consolidation program.

Here, you would need a debt settlement attorney and pay certain fees for their services. Moreover, whatever the amount that both parties have negotiated on, it has to be settled right away so you must have enough cash to do so. After that, in your credit report, the accounts where you and the lender agreed to your paying only a part of the total amount would be written off as ‘settled.' This would put a dent in your credit rating and will remain there for seven years.


How to Choose the Right Nonprofit Debt Consolidation Company?

It is absolutely imperative that you do your basic research before you select the most appropriate nonprofit debt consolidation company that will actually solve your problems at minimum or no cost. Begin by checking whether the company is NFCC-affiliated. This implies that it should be a regular member of the National Foundation for Credit Counseling. All member organizations of the NFCC are 501(c) 3 nonprofit organizations providing debt relief.

When talking to them, ensure that they are charging you any fees up-front. It pays to remember that sales rules pertaining to telemarketing for non-profit debt consolidation companies clearly state that they are not permitted to charge any up-front fees before they offer you a particular service.

Makes sure to go through the Better Business Bureau (BBB) to check if any complaints have been filed against the prospective company with it. Also, find out how complaints were resolved as and when they were filed. This will give you a clear idea about the efficiency of the organization.

It is also important to check with the attorney general of the state and/or the bureau for consumer protection whether the prospective non-profit debt consolidation company has a proper license to operate in your state. These investigations will also reveal if there are any legal actions or investigations going on against the company and the reasons behind it.

Any non-profit debt consolidation company is bound to analyze your case for free. Moreover, their credit and budget counseling services are also for free. Avoid any such company that charges anything for the aforementioned services.


Disadvantages of Non-profit Debt Consolidation:

As the saying goes, the shadow of debt always looms large like a curse till it is eliminated. That’s why non-profit debt consolidation is not without its drawbacks, few as they may be.  The degree of relief obtainable from debt consolidation depends solely on the nature of the loan – whether it’s secured or unsecured. In case the loan is unsecured and is converted into one solitary secured loan, there is a major risk involved: If the debtor pledges his assets as collateral, he puts that particular asset or assets at risk.

Subsequently, if it so happens that he is unable to repay the loan, he could lose his car, house, retirement fund and/or life insurance or whatever he pledged to secure his loan. Thus, the fact that you may have your retirement funds or life insurance forfeited is indeed a major risk that you expose yourself to.

The secured loan’s term may also be a shade longer than the debt obligations term consolidated. This usually leads to a sharp increase in the total interest paid pay over the consolidation loan’s life and is often greater than the interest payable on individual debts, even though your monthly payments are lower.

Debt consolidation loans on unsecured debts are usually hard to obtain if your credit scores aren’t top notch. That’s why most people requiring loans for debt consolidation don’t qualify. Also, interest rates for unsecured loans are higher generally as compared to those of secured loans. Thus, you may end up making higher payments that could disrupt your financial condition further.

Using options for balance transfer on low-interest or no-interest credit card offers may be tricky. A transfer fee is quietly inserted into the fine print which erodes the debtor’s savings to a certain extent. Moreover, if the card is for any other purpose, these charges could generate interest also while payments are first applied to the initial no-interest balance.

Also, the low-interest or no-interest period is generally limited. If the debt isn’t paid off during the stipulated period, higher interest may have to be initiated as the offer period expires. Thus if credit is used before the consolidated debt is paid off, the debtor digs himself into a much deeper hole.


Why should you consider having a nonprofit expert on your side?

Free financial advice should be available to all people, whether they opt a for-profit or a non-profit agency. However, being in a notorious business such as this, it is hard to find honest finance agency who actually puts your interests before anything. A non-profit expert does not only offer free information, he has also completed and earned the necessary certifications. Thus, all pieces of advice and opinions you hear from your consultant are accurate and well-researched.

Aside from that, there are usually are no late fees to worry about. This, however, should not be a reason for you to miss payment deadlines or to become more lenient. Instead, look at this as an opportunity to organize your finances and miss the deadline a few days without any penalties. Nonprofit believes in forgoing profit in order to help those who need it. Grab the chance to change your life for good without the extra burden imposed by regular businesses.

Lastly, even as early as the consultation stage, nonprofit experts are committed to solving your problem. We are not just talking about debts here. In order for that to never happen again, unless of course some extraordinary circumstance is added to the equation, you have to address the root of the problem. Debt is like the illness that a consolidation loan might just cure. However, your habits, your lifestyle, and perhaps lack of income are the causes. These are what these experts address. Instead of just throwing products, aggressive sales tactics, and a lot of shady practices on your face, they help you become financially healthy and stable.

Consolidating your debts through a nonprofit agency is not without its flaws. There are some who do not have certifications or ask for small “donations.” So, as you would with an ordinary finance agency, do your research before deciding on where you should take your business.

Elizabeth Johnson

Elizabeth is an expert on Debt Consolidation as she provides helpful advice to people who are dealing with debt problems. She graduated college with a BS in Finance. After college, she took a job working at a non-profit debt counseling program. It was at this position where Elizabeth honed her expertise for helping people understand how different financial products work and finding ways to help people pay off their debts.