In a country where the average debt per Mastercard is over $4000 and close to 1 / 4 of USA citizens admitted to maximizing out one Visa card, it is smart that folks are on the lookout for simple answers to ease their burden of debt. A non profit debt consolidation company can seem to be the solution to a prayer.
Many Americans have several credit cards, all with substantial balances and high interest rates and monthly payments. A non profit debt consolidation company negotiates with each creditor to reduce interest rates and monthly payments. After getting the best deal possible for the consumer, the non profit debt consolidation company totals the monthly bills, so that the consumer only has to write one check to the non profit debt consolidation company. The company then distributes the payments to the different creditors.
The good non profit debt consolidation firms also offer fiscal support and help with budgeting so the customer doesn't find him or herself right back in the hole. Sadly , though , as with any other sort of business, there are good firms and bad ones. The coolest ones will help you to get and stay clear of debt.
The bad ones will pocket your monthly payments to fill their own coffers. Your understandably outraged creditors won't see a cent of the money, or if they do, they will receive far less than the agreed upon amount. The creditors will then take out their anger on your with harassing phone calls, negative reports to credit agencies, etc.
The Fed Trade Commission site offers wonderful info on separating the wolves from the lambs. Generally be cautious of any company that uses high pressure sales systems or charges exorbitant "up front" costs or donations.
Debt consolidation is not for everyone. Before starting you on a debt consolidation plan, the company should offer you credit counseling to get a full picture of your income, spending habits, financial strengths and weaknesses, etc. Any company that automatically wants to place you on a debt consolidation plan is suspect. Ask the company upfront if they will keep a percentage of your monthly payment and what that percentage is for. Ideally all the money you pay monthly should go to your creditors.
Finally, just because the business advertises itself as non profit does not necessarily mean it is honest. Many illegitimate "non profits" charge exorbitant "donations" to use their services. Getting in with the wrong debt consolidation company can cost you your credit rating and your peace of mind. Do your research carefully to make sure the company you are working with has your best interests at heart.
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