What is Non-Profit Debt Consolidation?
Non-profit debt consolidation is a service that seeks to help borrowers get better control of their debt without profiting from that service. Most consumer credit counseling services are non-profit. While they do make money, the income is used only to pay expenses associated with providing the service, such as salaries, rent, utilities and other such expenses. Any money left over may be invested in infrastructure or equipment to improve the service.
A non-profit debt consolidation service usually receives its money from working with creditors. Some may include a small fee from the borrower, but that can be waived if paying it would cause a hardship. Typically, by the time borrowers seek out such a service, they have fallen behind on their payments and are reaching a relatively desperate situation. Thus, creditors are usually ready to make some concessions in order to protect the investment they have made. This includes working through a third party to recover the money they are owed.
The first order of business of a non-profit debt consolidation service is simply to assess the financial condition of the borrower. The service will look at all obligations, including debt, and income. Then, it will work to consolidate as much of that debt as possible, even renegotiating terms with creditors to get lower interest rates or an extended repayment plan. This could lower the monthly obligation of the borrower significantly.
The non-profit debt consolidation service will then give the borrower an address to send a single check every month for the bills that have been consolidated. This may be the same office the individual borrower visits, or may be a different location. Once the money is received, it is then distributed to the different lenders as agreed. This offers the advantage for the borrower of not only a lower payment, but the convenience of only having to send one check instead of multiple checks.
Though non-profit debt consolidation services primarily deal with the actual debt, they will offer budgeting services as well. This will include lessons on how to prepare a budget, balance a checkbook, and the appropriate uses of credit. If the borrower takes these lessons to heart, the hope is that it will prevent the need of the borrower from requiring the service in the future.
Many local communities have non-profit debt consolidation services. If living in smaller town or rural area, consumers may need to go to a larger location. Still, the services are available within an hour or two by car from most people in the United States. After an initial meeting, some additional discussion and planning may be done by phone, which may be attractive to those having to travel longer distances.
Written by Ken Black
