A debt consolidation non profit is an organization established to help individuals to work their way out of debt for a minimal cost, or in some instances, at no cost to the consumer. These organizations only charge consumers or lenders an administration fee used to pay employees and handle other business costs, but do not turn a profit. They may be a good option for those struggling to manage debt.
How to Select a Debt Consolidation Non Profit Organization
A large number of professionals offer debt consolidation services, but are not all are equal. Several government agencies have warned Americans about the misleading programs that often lure in consumers hoping to get out of debt.
When selecting a credit counseling agency or a debt consolidation company, there are several aspects to look for in particular:
- Certified Counselor: Select an organization offering a certified counselor who is knowledgeable about budget management and will work to develop a budget with you.
- Ability to Work with Creditors: It is important for the credit counselor to work closely with your creditors to lower payment requirement and to eliminate or lower interest charges. They also must work closely with creditors to set up an approved repayment plan.
- Answers Questions Thoroughly: Ask questions. Be sure to understand how the debt payments will be made. Find out what happens when the payment is missed. Find out what the organization can do if your required payment is too high for you to afford. Find out how they safeguard personal information.
- Learn Costs: All organizations must charge some fee to keep the organization operational, but some of these organizations collect the fees from lenders instead of the consumer. They should be upfront and clear about all payments required. There may be a start up fee and an additional monthly maintenance fee required. The costs should be in writing. Read the written agreement to determine if and how costs may rise.
- Better Business Bureau: You should check with the Better Business Bureau before agreeing to work with any debt consolidation organization. If there are complaints filed against the agency, note if they have been resolved.
- Only Select Non Profit Organizations: Most people will benefit from working with a non profit organization for debt repayment. These organizations offer low fees. Learn the profit status of the organization by asking.
Learn all that you can about these organizations before working with them or signing a contract with them. Also, stay up to date on rules and regulations governing the organization. To find a reputable consumer credit agency, visit The Association of Independent Consumer Credit Counseling Agencies.
Federal Trade Commission
The Federal Trade Commission, or FTC, warned that some companies misrepresent themselves as non profit companies but do charge excessive fees to clients. Additionally, their marketing strategies have been questioned, specifically in the way these companies have promised to aid individuals in getting out of debt. Some companies do not disclose all fees charged upfront. To read more about the complaints about debt consolidation companies like this, visit the FTC website.
Debt Consolidation Organizations Online
Many of the debt consolidation non profit organizations are now available online. Some offer a debt analysis free of charge. This allows you to give all your debt information to the organization and they will determine an estimated monthly payment for you. These are acceptable as long as they do not require you to pay a fee or enter into an agreement before reading documentation.
Keep in mind that debt consolidation companies are unable to erase debt from credit histories or to change credit scores. All debts must still be paid even if you work with the agents. These organizations do provide consumers with educational materials on making better financial decisions and they do negotiate on the behalf of the consumer to lower debt obligations. If an individual fails to keep up with their repayment requirements, the contract may be voided and all debt incurred may be required to be repaid.
Debt consolidation organizations and companies are required to abide by the Fair Credit Reporting Act. Some individuals may have a negative impact on their credit score initially when working with these organizations, but the long term benefits may be worth it.