Non Profit Debt Consolidation
It’s vital that you understand this form of debt consolidation is not the same as a traditional debt consolidation loan. Whether it’s for profit or non profit, a consolidation agency (also known as credit counseling agencies) do not give out loans of any kind. So, you will not be getting a large loan from them to pay off each of your creditors. But that’s okay, because debt consolidations can sometimes make your financial situation even worse. For one thing, they still count as an additional loan which can have a negative impact on your credit score. How do they help you then? Let’s take a look.
As mentioned, they don’t give you a loan. However, they will negotiate directly with the companies you owe money to. They will try to get lower interest rates, forgiveness of fees, or even a reduction in the total amount you owe. Once they have taken care of this step, they calculate how much a single monthly payment you need. You will send this payment to the non profit debt consolidation agency and they will then distribute it based in the individual arrangements they have made on your behalf. And, because you are not getting a loan, using an agency may leave your credit score unscathed.
A lot of people choose these agencies to get their debt back under control. While they do a lot for you, and make things more convenient, you still need to understand what they’re doing with your payment. Also, both for profit and non profit agencies will collect a fee of some kind for their services. In general, the non profit debt consolidation agencies will charge less than the for profit ones. However, this is almost always added into the monthly payment so you still have one payment.
Once you choose a consolidation company, you will get a full explanation of how they will allocate your payment. If they don’t do so, ask for one. In fact, ask ahead of time if they will provide you with such an explanation, if they say no then move on; even if it’s a non profit debt consolidation agency. You should also expect to get some sort of basic financial plan and budget. That’s where the “counseling” comes in. They are not only there to help you get out of a sticky financial situation, but also to prevent you from getting into a similar situation in the future.