Nonprofit Debt Consolidation

If you want to get help managing credit card debt without having to take out a loan, nonprofit credit counseling agencies like InCharge Debt Solutions can help with nonprofit debt consolidation, sometimes referred to as a debt management plan (DMP).

The agencies provide an initial, free session with a credit counselor, which will help you decide if you want to enroll in a DMP. The discussion will include a professional review of your finances and help creating a monthly budget.

Counselors will also review with you other options for getting out of debt, and will discuss which solution works best for your financial situation.

What Is Nonprofit Debt Consolidation?

Nonprofit debt consolidation, also known as a debt management plan, is a specific type of payment plan that helps you pay off unsecured debt, with includes credit card debt, medical debt and other types that aren’t tied to collateral. It’s not a loan – you don’t borrow money to pay off the debt. It’s also not debt settlement – you do pay the full amount you owe, but your monthly payments and overall payments will be lower because you’ll pay lower interest rates and some creditor fees will be waived.

With a DMP, you work with an accredited nonprofit credit counseling agency, which will set up new payment arrangements with your creditors. You send one monthly payment to the counseling agency, which the agency disperses to your creditors to pay your accounts. The payment includes an administrative fee, and the accounts being paid off are closed, which means you can no longer use them.

The three to five years it takes to pay a DMP may seem like a long time, but there are huge benefits. You make one monthly payment instead of juggling a bunch of payments each month, and the payments are for a fixed amount of time, instead of never-ending credit card revolving payments.

Credit card debt is the largest drivers of people turning to a DMP, and there’s good reason for that. The average credit card interest rate in 2025 was 22.32%, and if your cards are maxed out, your credit score isn’t great or you’ve missed payments, you may be carrying credit card interest as high as 36%. Debt consolidation nonprofits can reduce it to, potentially, 8% or lower, which means much lower monthly payments as well as get you out of debt sooner.

One of the biggest benefits of a debt management plan is that they work with creditors who agree to make changes that lower your monthly payment and what you’d have to pay overall, including:

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

How Does Nonprofit Debt Consolidation Work?

The steps to creating a debt management plan with a nonprofit credit counseling agency are:

1. You contact the agency by phone or online, and set up a free credit counseling session. The counselor reviews your finances with you, including income, debt and expenses. Your credit score doesn’t make a difference as far as eligibility for a DMP goes – the counselor will help you determine if you have the income to make monthly payments on the debt that you owe. If you don’t, they’ll help you explore other debt relief options.
2. Once a plan is determined that has a monthly payment that works with your budget, you sign a contract with the counseling agency formalizing the plan.
3. The credit counselor works with your creditors to reduce interest rates and possibly waive accumulated late fees.
4. You make a monthly payment to the counseling agency, which includes an administrative fee, usually through automatic withdrawal from your bank account.
5. The agency closes your credit card accounts and makes your credit card payments for you. You watch your balances decrease on your online dashboard, and over the course of three to five years, your unsecured debt is paid off. As your balances decrease and payments to accounts are made on time, you’ll eventually see your credit score improve.

Types of Debt Eligible for Nonprofit Consolidation

Nonprofit debt consolidation is designed to help manage unsecured debt, which is debt that’s not backed by property as collateral. The type of unsecured debt that can be included on your DMP are:

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

Types of Debt Ineligible for Nonprofit Consideration

Types of debt that can not be included in a DMP are:

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

If you have debt you can’t pay that can’t be included in a DMP, contact the lender or agency to find out what assistance they offer. Budgeting is important as well – it may turn out that managing your unsecured debt with a DMP will fee up money to make payments on non-eligible debt.

Benefits of Working 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 contacting an NFCC-certified agency for help instead.

Another benefit of NFCC-certified credit counselors is that they 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

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.

Nonprofit Debt Relief vs. For-Profit Debt Relief Companies

For-profit debt relief, also known as for-profit debt settlement, often bills itself as “debt relief,” but there’s no guarantee you’ll get relief from debt.

For-profit debt settlement companies charge a percentage of what you owe in debt, have you stop making debt payments, then negotiate with creditors on a settlement that’s less than what you owe. There is no guarantee that they’ll be successful. If they are, you must pay income tax on the forgiven debt if it’s higher than $600, and your credit report will show that you didn’t pay the full balance on a debt. Your credit score will also suffer since they require that you stop making payments while they negotiate.

Federal law prohibits debt settlement companies from charging up-front fees, but doesn’t cap what they can charge. Each state has its own law. Some are favorable to lenders – for instance, in Maine, a debt settlement company can’t charge more than 15% of the reduced balance or $40 a month, whichever is more. Debt settlement is severely restricted or prohibited in 18 states. Some states, however, don’t have limits on what a debt settlement company can charge.

While many for-profit debt relief companies are on the level, it’s also an industry that’s rife with scams and fraud. It can be hard to determine the legitimacy of a for-profit debt settlement agency, particularly if it’s pressuring you to sign a contract with them. Accredited nonprofit credit counseling agencies provide a level of security that for-profit debt settlement doesn’t.

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

	InCharge DMP	For-Profit Debt Relief
NFCC-certified agency	Yes	No
Free credit counseling	Yes	No
Income-based fee waivers	Yes	No
Possible reduction in interest rates	Yes	No. Creditors may impose penalty APRs and late fees.
Guaranteed outcome if you stick to the plan	Eliminate debt	None
Impact on credit scores	Initial drop, long-term increase	Severe, long-term damage
Impact on credit report	• On-time payments • Improved credit utilization • DMP not shown on reports	• No payments while settlement negotiated • Unpaid balances stay on report for 7 years
Average Set-up fee	$52	$50+
Average Monthly fee	$34	$15-40
Other fees	N/A	15%-25% of the total debt owed Cancellation fee up to $200
Length of payment (months)	36-60	Up to 48
Income tax impact	None	Income tax must be paid on unpaid balances if $600-plus

Requirements for Nonprofit Credit Consolidation Programs

Depending on your circumstances, a DMP may not be the right fit. Your credit counselor will start by reviewing your overall financial situation to help determine whether it is, and if you’re eligible. It’ll then be up to you whether you want to move forward with one.

Some of the eligibility requirements for a DMP are:

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

The initial counseling session with an NFCC agency is free. If you enroll in a debt management plan, you pay an initial enrollment fee, plus monthly fees set by the agency. Fees vary by state, but the average InCharge fee is $52 for enrollment fee and a $34 monthly fee that’s included in your monthly payment. Most other nonprofit debt consolidation companies charge similar fees.

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 debt-relief solutions, not just DMPs
• The agency offers an online account so you can track payments, balances, and interest
• It is accredited by the Better Business Bureau (BBB) and has a strong reputation

Another way you to determine 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). The National Association of Attorneys General has a searchable database for all 50 states.
• gov’s searchable list of consumer complaints.

Alternatives to Nonprofit Debt Consolidation

If a debt management program isn’t right for you, there are alternatives. A credit counselor at a nonprofit credit counseling agency can review these with you and determine if one is a good fit with your financial circumstances.

For-Profit Debt Settlement

With for-profit debt settlement, a third party negotiates with your creditors on a lump-sum payoff for less than what you owe. You’ll be asked not to make payments on your accounts during negotiations, but instead to make a monthly payment that goes into an escrow account toward the lump sum. Once the settlements are negotiated, the company makes the payment. You’ll be charged 15%-35% of what you owe, or on the reduced amount, depending on the laws in the state in which you live. You’ll also pay income tax on any unpaid balance of more than $600. The fact your cards weren’t fully paid will remain on your credit report for up to seven years.

Nonprofit Debt Settlement

InCharge and a limited number of other nonprofit credit counseling agencies offer Credit Card Debt Forgiveness, or Less Than Full Balance, programs that are a safer alternative to for-profit debt settlement. To qualify, you must be at least 180 days behind on your credit card payments. A limited number of lenders participate in the program, so it may not be a solution for you if your lenders aren’t part of it.

With nonprofit debt settlement:

• Lenders agree to accept your settlement upfront (rather than being negotiated the way for-profit is)
• Forgiveness of 40%-50% of your credit card balances is guaranteed
• You make payments for 36 months
• No interest is charged during the repayment period

Debt Consolidation Loan

If your credit score is fairly good, a debt consolidation loan may be the best solution to tackle your credit card and other unsecured debt. You take out a loan and pay off unsecured debt, leaving you with one monthly payment. Many lenders who offer loans specifically for debt consolidation require that some or all of the loan money goes to pay off debt, and many even pay the creditors for you. Besides just having one monthly payment, the loan balance is also paid off in a specific time, rather than the never-ending revolving debt of a credit card.

Debt consolidation loans are only a good solution if your credit is good enough to get a favorable interest rate that will save you money. It’s also important to not run your credit cards back up and end up with even more debt than you had before.

Balance Transfer Card

A balance transfer card is a credit card with a special promotion that allows you to transfer balances from other cards for no, or very low, interest. The promotional interest rate only lasts for a specific time – usually 12 to 18 months – so if you qualify for a balance transfer card, be sure you pay the balance off before the rate goes up. You generally need a good credit score to qualify for one.

Bankruptcy

Bankruptcy should be a last-resort alternative. If your debt is unpayable given your income and there is no other solution, filing for bankruptcy will wipe away most debt.

Chapter 7 bankruptcy, the most common for consumers, requires that you liquidate your assets in order to pay debt. What can’t be paid is then discharged. Most people who file Chapter 7 can keep their house as well as their vehicle. You must pass a means test to qualify, which determines that your income isn’t adequate to pay your debt.

Chapter 13 bankruptcy is for those who don’t pass the means test. You pay your debt under a court-structured three-to-five-year plan, and any unsecured debt left after the plan is completed is discharged.

Do It Yourself

It’s possible to tackle your debt on your own. Create a budget, so you know where your money is going every month, cut down on unneeded expenses, and target your debt with as much of your discretionary income as you can. You may be able to negotiate with your lenders to lower interest rates and waive fees.

Two popular methods of paying down credit cards are the avalanche and the snowball.

With the avalanche method, you target the card with the highest interest rate, paying as much as you can afford to each month, while maintaining minimum payments on your other cards. Once that card is paid off, the money you were using to pay it then goes to the one with the next-highest interest rate. The more high-interest debt you pay down, the faster the card balances disappear.

With the snowball method, pay off the card with the lowest balance first. The psychological effect of paying off one card is great motivation for continuing with the next one. Similar to the avalanche method, once one card is paid off, combine the money that was going to that one with the next one you’re targeting, and so on, until they’re all paid.

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.