If you’re struggling with debt and aren’t able to meet your minimum payments, it can be difficult to know what to do or who you can trust. But here’s the deal — making a plan to pay your debt is the first step towards freedom, and making a plan with a nonprofit debt consolidation counselor might be a great way to make it happen.
What is nonprofit debt consolidation?
When it comes to debt consolidation, there are a few different options — unsecured loans, balance transfers and mortgage refinances — but nonprofit debt consolidation works a little differently. Instead of creating a new loan, you’ll work with the nonprofit to create a debt management plan (DMP).
Nonprofit debt consolidation might not be the answer for everyone, but it does offer some unique benefits.
1. Free, high quality financial counseling
One of the biggest benefits of nonprofit debt consolidation is 24-hour access to a trained financial counselor. The counselors look at your unique money situation and provide tailored solutions for all areas of life. They will also negotiate with creditors on your behalf and secure the best repayment terms possible. The debt consolidation process can feel confusing, but with a trained credit counselor to help you navigate it, you’re never alone.
Also, nonprofit debt counselors don’t receive compensation for selling financial products. So you’ll never have to listen to a sales pitch, and you’ll definitely never have to hear one that benefits the company’s finances more than yours.
2. No credit score requirement
Unlike consolidation loans or balance transfer credit cards, debt management plans don’t have credit score requirements. This is particularly important if your score is low because it means that you’ll still have access to all of the benefits of those options — one monthly payment and lower interest rates — without having to raise your score in order to qualify.
3. Low-cost programs with fee waivers
When you’re getting out of debt, the last thing you want to do is pay money to do so, and that’s why there are minimal fees associated with creating a DMP. But here’s the deal — a reputable nonprofit company won’t turn you away because you can’t pay the fees. They will work with you to find a solution. In fact, there are even fee waivers available. In order to qualify, applicants have to meet income requirements and provide proof, but if you qualify, you’ll be able to use the services for free.
4. Financial benefits
Here’s how it works — with the help of the nonprofit, you’ll create a repayment plan with your creditors. This often includes lower interest rates in exchange for closing your credit cards and committing to repay your debts in full.
Also, instead of paying the creditors directly, you’ll make one monthly payment to the nonprofit and they’ll pay the creditors on your behalf. In other words, you’ll no longer have to manage multiple due dates and minimum payments. You’ll have one monthly payment that will remain the same throughout the course of the program.
5. Breaking the cycle
Balance transfers and other debt consolidation methods often provide temporary relief, but don’t necessarily solve problematic money habits. If you struggle to live within your means or deal with compulsive shopping, then a DMP — which requires that you close your credit card accounts — might be the best way to break the cycle of spending.
Choosing a debt consolidation plan is a personal decision, and you’ll want to consider a variety of factors before taking the leap. Whether or not the benefits of nonprofit debt consolidation are a good fit will be up to you, but if you’re looking for more information about nonprofit debt consolidation or details about DMPs, Money Management International has trained financial counselors who may be able to help. The counselor will take a comprehensive look at your finances, offer personalized recommendations based on your needs and answer questions.
Taylor Milam is a personal finance writer and educator who is passionate about helping people overcome debt and take control of their finances.