Nonprofit Debt Consolidation

Want to get help managing credit card debt without having to take out a loan? Nonprofit credit counseling agencies like InCharge Debt Solutions offer a solution that can work for many debtors: it’s called nonprofit debt consolidation, or sometimes referred to as a Debt Management Plan (DMP).

If you’re not sure about trying out a nonprofit solution, it doesn’t hurt to talk to a counselor. Before you enroll in a DMP, you’ll get a free credit counseling session, which includes a professional review of your finances and help creating a monthly budget.

Counselors also review your options for getting out of debt and can help you decide if nonprofit debt consolidation is right for you. Plus, they can suggest other options based on your credit scores, debt accounts and other details.

What Is Nonprofit Debt Consolidation?

Nonprofit debt consolidation, also known as a Debt Management Plan, is a special payment plan that helps you pay off certain debt.

These plans do not involve applying for new loans to pay off old accounts. Instead, you’ll work with an accredited, nonprofit credit counseling agency to set you up on a new payment arrangement with your creditors. Then, you’ll send a monthly payment to the counseling agency, which the agency will disperse to your creditors.

Why would you go this route? Although DMPs usually take three to five years to complete, there can be huge benefits. Namely, your creditors may agree to make changes to your debt payments in order to help you get rid of debt. This often includes:

• Reducing your interest rates
• Reducing your monthly payments
• Forgiving late fees
• Removing missed payments from your credit reports

What Types of Debt Can a Nonprofit Debt Consolidation Company Help With?

Nonprofit debt consolidation is designed to help you manage unsecured debt, which is debt that’s not backed by property as collateral. That means, for example, that you can’t include mortgages and car loans on your DMP.

Credit cards are often the main concern for people who use nonprofit debt management, but several forms of unsecured debt can be included on your DMP:

• Traditional credit cards
• Department store/retail credit cards
• Medical bills
• Unsecured personal loans
• Payday loans

Still, if you have challenges with credit card debt, you might find a DMP particularly appealing.

Your credit cards may currently have interest rates as high as 36%. But debt consolidation nonprofits can potentially reduce them to around 8% or lower, which means much lower monthly payments for you, as well as getting out of debt sooner. You can explore this and other debt relief options to find the solution that best fits your situation.

Debts Not Eligible for Consolidation

Some types of debt simply can’t be included in a DMP. For these debt types, the lender or agency that you owe money to may require you to reach out to them directly in order to get assistance with making payments affordable. This includes:

• Mortgages and other home loans
• Car loans and car title loans
• Federal student loans
• Tax debt

Why Work with a Nonprofit Debt Consolidation Company?

Nonprofit credit counseling agencies have a lot to offer! Unlike for-profit companies, they focus on education and long-term financial wellness, not making a profit.

InCharge Debt Solutions and other 501c (3) nonprofit counseling agencies are accredited by the National Foundation for Credit Counseling (NFCC). Their mission? To help clients find relief from debt.

On top of that, nonprofit credit counseling is free, and there’s no obligation after counseling to enroll in any programs that have fees. If you feel any pressure from a for-profit company, try reaching out to an NFCC-certified agency for help instead.

Another benefit is that NFCC-certified credit counselors can provide you with education and support on a variety of matters, including:

• Budgeting
• Homebuying
• Improving your credit
• Strategies for eliminating debt
• Avoiding foreclosure, repossession and eviction

Plus, you can’t be turned away from counseling because of bad credit, and you definitely won’t be judged for your credit status or for how much you owe.

Requirements for Nonprofit Credit Consolidation Programs

Depending on your circumstances, there’s a chance a DMP won’t be the right fit. Your credit counselor will start by reviewing your overall financial situation to see if it can be helpful, determine if you’re eligible and help you decide if you want to move forward.

Here are some of the eligibility requirements you’ll have to meet in order to enroll in a DMP:

• You have a steady income.
• You can afford your new payment agreement.
• Your debt qualifies you to enroll in the program.
• Either you can afford the DMP fees or you qualify for a fee waiver based on your income.

With nonprofit credit counseling from NFCC agencies, your initial counseling session is free. Then, if you enroll in a debt management plan, you’ll pay an initial enrollment fee, plus monthly fees set by the agency.

Fees vary by state, but on average, InCharge charges a $52 enrollment fee and a $34 monthly fee.

What the Best Nonprofit Debt Consolidation Looks Like

There are a lot of agencies that offer nonprofit debt consolidation, so it’s important to compare them before enrolling.

No matter where you go, you can find the best nonprofit debt consolidation companies by prioritizing these features before joining a Debt Management Program:

• The agency is NFCC-certified
• No up-front fees before you receive counseling
• No pressure to enroll in a DMP
• The certified counselor reviews your finances before suggesting a DMP or other solutions
• The DMP has a fixed monthly fee
• The DMP program gives you lower interest rates
• The counseling agency offers a variety of resources, not just DMPs
• The agency will create an online account where you can track payments, balances, and interest
• Accredited by the Better Business Bureau (BBB) with a strong reputation

Nonprofit Debt Relief vs. For-Profit Debt Relief Companies

Have you heard those radio ads or seen the TV commercials where companies promise to eliminate your debt? Don’t believe everything you see or hear! While “debt relief” probably sounds like it should be helpful, this for-profit industry is highly predatory.

With for-profit debt relief, also known as for-profit debt settlement, there’s no guarantee you’ll get any relief from debt.

These companies can’t make any legal guarantees of reduced debt, and yet customers pay them to do something anyone can do on their own: stop making debt payments and then try to negotiate debt settlements with creditors.

Whether or not they’re successful, you usually have to pay these companies a monthly fee for several years before you get any potential relief. In the meantime, your money does not go to your creditors, and you rack up late fees and damage to your credit reports for years. You also run the risk of being sued by creditors for the unpaid debt.

Here’s an overview of some key differences between nonprofit DMPs and the average for-profit debt relief plan:

Another way you can decide if a company is worth working with is to look them up on these sites:

• The Consumer Finance Protection Bureau’s state-by-state database of debt relief complaints.
• The Better Business Bureau and Federal Trade Commission‘s lists of fraudulent companies and scams.
• Your state attorney general or consumer protection bureau (to make sure the company is licensed in your state.
• USA.gov’s searchable list of consumer complaints.

What About Nonprofit Debt Management Programs?

We admit, the names of the different programs can be a bit confusing. But just to clarify, nonprofit debt consolidation is the same thing as debt management plans or programs (DMPs). Whatever name you use, these programs are built for people who need help dealing with unmanageable credit card debt or other qualifying bills.

If you want to enroll in a Debt Management Program here’s how the process works:

1. Schedule a free appointment with an NFCC-certified credit counselor.
2. If desired or suggested during intake, take time to gather your recent bank statements and credit card statements.
3. Meet with the counselor over the phone, online or in-person.
4. Review your budget and debt with your counselor.
5. If you appear to be eligible, your counselor will work with your creditors to try and set up an affordable payment arrangement.
6. Pay the one-time setup fee.
7. Your creditors will likely close all of the accounts that are included in the DMP.
8. Make set monthly payments to your counseling agency for 3-5 years. You’re also allowed to pay off the debt early if you’re able to.
9. If desired, you can add eligible accounts to your DMP.

What About For-Profit Debt Settlement?

Another option that can be appealing for dealing with debt is debt settlement. With debt settlement, you or a third-party negotiates with your creditors to try and offer a lump-sum payoff for less than what you owe.

Nonprofit agencies don’t typically offer these services, since they put customers at high risk.

However, you might consider a Credit Card Debt Forgiveness program or a Less Than Full Balance program offered by a nonprofit credit counseling agency. These programs are far safer than the for-profit alternatives, and they come with unique and appealing features for people who qualify:

• Lenders agree to accept your settlement upfront
• Guaranteed forgiveness of 40%-50% of your credit card balances
• You only make payments for 36 months
• No interest is charged during your repayment period

To qualify, you must be at least 180 days behind on your credit card payments.

It’s worth noting, however, that a limited number of banks participate in the program. That means it could be hard to find a nonprofit credit counseling agency that can help with your accounts.

InCharge is currently one of the few agencies that offers a Credit Card Debt Forgiveness program.

Getting Started with Nonprofit Credit Counseling

If you’re struggling with debt, nonprofit credit counseling can be a crucial first step in regaining control.

It’s free to talk to a certified credit counselor, and these financial professionals offer personalized advice. In other words, there’s no downside to contacting a counselor.

Credit counseling sessions are also judgment-free, fully confidential, and focused entirely on your financial well-being.

No matter your situation, InCharge Debt Solutions counselors are here to review your income, expenses and debt, and help you understand which debt relief options work best!