How to Find Helpful Non Profit Debt Management Companies
You are sitting at your dining room table one evening sifting through the stack of debt that keeps growing. You are trying hard to get it paid, but making a workable budget is beyond difficult when your daughter needs braces, your plumbing needs to be repaired, your car needs a new engine, you have baby number three on the way, and you are already away from your family for work too much.
Hiring a Non Profit Management Company
What can you possibly do? Is there any hope at all? For most people, hope seems too far away. Crawling into bed and covering your head up so you don’t have to face it or screaming at the top of your lungs seem like the only choices you have, but I have good news for you:
There is hope for you through the service and abilities provided by non profit debt management companies.
I am not talking about a magical, quick fix. Sorry, but the only way I know to do that is to inherit your long-lost billionaire uncle’s money or to strike oil in your back yard. Even then, things take time.
What I am talking about here is an effective way for people to get out of debt without incurring any new debt or even settling for lower amounts. Let’s get into it a little deeper.
What is Debt Management?
Debt management is very simply a method through which you are able to repay your debts with lower interest and fees through a DMP, or debt management plan. Non profit debt management companies work to create a doable repayment plan for you to follow.
What Exactly Do Non Profit Debt Management Companies Do?
Non profit debt management companies normally assign you a credit counselor- sometimes a small group- to work with you through your DMP. This individual or team is dedicated to providing you with the best plan possible, but they also go beyond that. If during your DMP you face any financial challenges, you can speak to them and they will try to find a way to help you through the struggle.
They also split your payments between your creditors so you are pretty hands-off throughout the process. Additionally, your dedicated individual or team educates you throughout your DMP in order to help you stay out of debt once it is all over.
Factors to Consider When Looking for Non Profit Debt Management Companies
You want to sign on with the best non profit company you can. Start by considering the following about each one:
Beware of the “Non Profit” Claim
Do you know how easy it is to claim to be a non profit organization? If you do not, let me be the first to tell you that it is ridiculously easy to make any claim, including that one. Just because a company says it is non profit does not mean that it is. Instead, ask the company a question that they are required by law to answer truthfully: “Are you really a charitable organization?”
Accreditation and Reviews
It is important that you check out the accreditation and reviews of each of the non profit debt management companies you are considering. There are three particular organizations that accredit organizations that stay up to certain standards. They are The Council on Accreditation (COA), The Association of Independent Consumer Credit Agencies, and The National Foundation for Credit Counseling (NFCC).
Let me be clear, though: Just because a company is not accredited by these organizations does automatically mean they are not a good non profit company. It simply means you will need to do some additional research on that company. If you can find a company or debt management program online that are accredited with one or all of those, you are in good shape.
Beyond that, you need to take a look at other ratings and reviews. Check out the Better Business Bureau to see if the company has a reputation there. Also, you can do a simple Google search for the company name and find customer reviews. Get as much information about the company or program as you can prior to choosing one.
Fees
Many non profit debt management companies do not charge fees. Others do charge something to help keep the business afloat, but they are not looking to get rich off of clients. Rather, they simply want to cover their expenses. All charitable organizations need money to stay in operation. If they are unable to get enough grants to fund the organization, they have to come up with it elsewhere. Non profit debt management companies are no exception.
Think about it this way: Let’s say you live in the middle of a low-income neighborhood full of parents who work hard to provide for their families. While they work hard, though, they are paying ridiculously high daycare and after school care fees.
You decide to offer your babysitting services to help these families out. Now, if you have money to spare, you can probably cover all the necessary costs. If you do not, though, you are going to need money to help cover meals, snacks, toys, arts and craft items, safety items, and an increase in your water and electric bills. Like other non profits, you should consider charging a fee for your services, though it can be low enough to do nothing more than cover the absolute necessities.
This is how non profit debt management companies work. They offer their services for free or cheap as they really do aim to help you. It is not about them benefiting from you but about you benefiting from their services. If you talk to a company that tries to charge you hefty fees, you are most likely talking to a for-profit company. Look for one that provides their services for free or very low.
Debt Management Counseling
You want to sign on with a company that does indeed offer debt management counseling. This education is invaluable to a more favorable financial future. If you have to choose between one that does offer debt counseling and one that does not go for the one that does.
The Contract
Take some time to read over the contract before signing it. If the organization tries to be pushy and have you sign something you have not even had time to read, move on. Understanding what you are signing up for is vital. It is not a terrible idea to have a lawyer look over the contract, too.
Those are things to look out for, but there is usually one thing I trust above all of these things: My gut. If something does not feel right, it usually is not. If you do not feel comfortable with a company, look for another one, even if you do not quite understand why you feel uncomfortable. It is often your subconscious picking up on things that your conscious overlooks.
Pros and Cons of Working With Non Profit Debt Management Companies
Non profit debt management companies can provide you with a lot of benefits, but like all else in life, it is not all chocolate and rainbows. There are some negative points to working with them. Let’s take a look at the pros and cons:
Pros
Cons
Interest and Fees Should Drop
Most non profit debt management companies work with your creditors to set up a payment plan. If they do, the creditors will usually stop charging fees and lower your interest rate. All of that makes it easier for you to pay things off. Those with low credit scores usually get high-interest rates when they get any credit, but your credit score does not factor into debt management. You just might find yourself paying much lower interest than you could have possibly imagined.
One Payment
Part of the benefits of working with non profit debt management companies is that you make one payment and the debt management company splits it between your debts. For many, the ability to make only one payment instead of several and still be making progress is enough reason to work with non profit debt management companies. You get the benefits of getting out of debt without having to deal with all of the work and negotiations.
No More Calls
Once a creditor has agreed to the repayment plan, they usually calling you. How much better would it be to knock your debt out without dealing with the stress of those nagging phone calls?
Education and Counseling
One great thing about non profit debt management companies is that they do not simply help you get out of debt- they work to help you stay out. Throughout your time working with legitimate non profit debt management companies, you should receive debt management counseling. You will learn how to budget and how to handle your finances responsibly. Debt management counseling educates and empowers you to get on a good financial track and stay there.
Fast Debt Repayment
Under most circumstances, you can have your debt repaid in about three to five years. This, of course, varies according to the specifics of your debt, but three to five years is average.
You Cannot Open New Credit
This may be listed as a con, but it is actually not. It is very helpful for you. Once you agree to a debt management program, you are not allowed to open new credit. What is the point of getting out of debt if you will be getting back into it before you even make all of your payments?
It may seem like a horrible thing, but it really is not. However, if you know you will need credit soon, say for a mortgage or a car, you should hold off on enrolling with any non profit debt management companies.
Your Score May Drop
One of the least favorite aspects of debt management- and pretty much any other plan to work on credit- means seeing a drop in your credit score in the beginning. Of course, this does not always happen to every single person with every single credit score, but it does happen. This is because most changes you make to straighten out your credit requires some activity on your credit.
These changes can lead to a positive or negative change in your score, or there may be no change at all. It all comes down to several factors, including the debt management plan you are signed up for, how your creditors report the plan, and more.
Again, you may not see a change, but do not be surprised if you do - and don’t let it discourage you. Here’s what you need to know concerning your credit score for now: Being on a debt management plan means that you are not supposed to open any new credit, so it really does not matter how low your score goes at the moment.
Additionally, once you have finished your debt management plan- when you are allowed to open new credit- your score should be much higher. The bottom line is that while you are working through a debt management plan, you should not worry so much with your score.
Payments Are Not Immediate
After you have enrolled with whichever of the nonprofit debt management companies you have chosen, the plan does not immediately take effect. Don’t get me wrong: You are to pay your payment for the program pretty quickly. However, that payment is not immediately applied to your debts.
Your plan will take some time to cycle everything through and get going correctly. What this means for you is that you will either need to make one more payment to your creditors or risk getting a late mark on your credit. As I said earlier, the effect on your credit at the beginning of your debt management because your credit will- in theory- be much better at the end of the debt management plan. This is just something to take into consideration.
Not For All Creditors
It is important to understand that most non profit debt management companies deal only with credit card debt. You might be able to find one that offers a little more, but you should not expect things like student loans and such to be put into a regular debt management plan.
Limitations
Since non profit debt management companies run mostly- sometimes strictly- from volunteers, contributions, and employees with limited certifications, they are often limited in what they can do for you. However, most of them have the ability to get you on an effective repayment plan and more, but you never know until you speak with them what they can do for you.
Alternatives to Working With Non Profit Debt Management Companies
Working with non profit debt management companies is not the only option you have for getting out from under debt. Here are a few more:
1. DIY Debt Management
In truth, you can work with your own creditors to create a repayment plan if you want to put in the time and effort. Of course, that kind of eradicates the benefit of having much less stress. Still, it is an option for you.
2. Debt Consolidation
Debt consolidation is one method that gets confused with debt management, but they are different. Debt management is about working your current debt into a doable repayment plan. Debt consolidation is getting a new loan to pay off your old debt, so you are basically just trading for new debt. The payments and interest might be lower, though, so it is always worth looking into.
3. Debt Settlement
Debt settlement gets confused with debt management, too. Debt settlement means working with your creditors to decrease the amount you owe them. Debt settlement companies are typically for-profit companies, but you can settle your own debts for free.
4. Bankruptcy
Of course, there is always the good old fashioned method of getting debts erased from your credit completely through bankruptcy, but there are some things to know about this. Chapter 7 is the wipe it all away debt, and it is not exactly a popular option.
The courts typically put you on Chapter 13 bankruptcy, which is- wait for it- a debt repayment plan. The problem with this repayment plan is that it can affect your credit for up to 10 years, and the payments are not always doable.
Additionally, under most circumstances, you cannot file many debt types under bankruptcy, anyway. In short, if you are considering bankruptcy, try using a non profit debt management agency first. You will likely experience more benefits and your credit will typically improve much faster.
Conclusion
For anyone drowning in a sea of debt, working with non profit debt management companies just might be the answer for you. As with any and every financial decision, it is important to think it through, weighing out how it might help and might hurt you and your family. Take the time to interview several companies before choosing one and seek professional advice if you are uncomfortable making the decision on your own.