Are Nonprofit Debt Consolidation Services Really What They Seem?
Contributed by Kris Griebe
Is a debt consolidation service that claims to be nonprofit really free?
Many debt consolidation services claim to be nonprofit and say they will work with you to solve your financial problems. But be aware that just because an organization says that it is nonprofit, there's no guarantee that its services are free, or even legitimate. In fact, some debt consolidation services charge high fees, which may be hidden, or urge consumers to make "voluntary" contributions that can cause more debt.
Typically, a debt consolidation service works by taking all your debts and organizing them into one manageable reduced payment which you make to this service. The debt consolidation service in turn pays your creditors on your behalf, making it so you no longer have to pay your creditors directly. The amount they pay to your creditors is much less than what you paid to the service. This is where they make their profit. A nonprofit service relies solely on your "voluntary donations" to make their money.
When in doubt, don't be afraid to ask the nonprofit debt consolidation service a lot of questions
Before you consider using such a service, ask a few questions to make sure they are a reputable company. You are not obligated until you sign a contract. Find out exactly what fees or "donations" will be required of you, and be sure they are spelled out in the contract. Ask if the person who will be dealing with you is licensed. You can check this yourself by contacting your state attorney general's office.
