How Non-Profit Debt Consolidation Works

With thousands of companies jockeying for your business, it can be daunting to pick one. We'll go over a few things to keep in mind when you're investigating non-profit debt consolidation services.

Many consolidators say they're non-profit, but actually make profits in the millions. Companies use the "non-profit" label to lure people into thinking they have customers' best interests in mind. Other companies use their non-profit status to violate telemarketing laws from which charitable organizations are exempt [source: Federal Trade Commission]. Ask for proof of non-profit (501(c)(3)) status before doing business with an agency.

Some companies use religious affiliations in their names or on their Web sites. Some services do have genuine relationships with a religion, but some companies are just using the name so that you will be more willing to trust them. Don't let a religious affiliation sway your choice -- choose the service that is right for you.

Fees: Not all non-profits are free, but true non-profits should have minimum set-up and monthly fees. Some agencies advertise voluntary fees, but then force you to pay the full fee, even if it's too expensive for you. If a service has high fees, is vague about their fees, or forces you to pay a so-called voluntary fee beyond your means, go to a different agency. And be aware that with many agencies, the first month's payment will likely go to the debt consolidation firm -- not your creditors.

It took time to get into debt, and it will take time to get out of debt. Don't trust an agency that promises you will be debt-free in months. Likewise, make sure the debt consolidation firm spends its time on you. The National Foundation for Credit Counseling, a non-profit community organization, spends an hour, in person or on the phone, on a consultation to decide if you need consolidation [source: Dunleavey]. If a firm gives you a plan in a short amount of time, they have not spent enough time reviewing your expenses. Use an agency that spends a significant amount of time examining your finances.

Better Business Bureau (BBB): The Better Business Bureau uses a Reliability Report to keep records on businesses so consumers can choose the most trustworthy companies. The BBB maintains information on products and services, along with a record of complaints and complim­ents [source: Better Business Bureau]. Companies receive a satisfactory or unsatisfactory record based on how they handle customer issues. Before you decide on a company, check the BBB and only choose a firm with a satisfactory rating.

It can seem overwhelming to pick a non-profit debt consolidation firm with so many choices out there. But with a little patience and a lot of research, you can pick one that's right for you -- making you one of those smiling, debt-free people.

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