There are many different programs available that are designed to help consumers better manage and pay off their debts. Most of these programs can be separated into two distinct categories – non-profit debt relief and for-profit debt relief.
Although these programs often have similar features, there is one important aspect that sets them apart. Let’s take a closer look at what that is.
The Key Difference Between Non-Profit and For-Profit Debt Relief –
The one difference these programs will always have is that when a program is non-profit, it’s usually not looking to make any money off its customers. In this situation, there is another company or organization that pays for the agency to run and help people with their debt. This could be a bank, a college, a credit card company or another organization, and even the U.S. government has programs available to help consumers with their debt.
If a program is for profit that means that its goal is to make money off its customers. It’s always better for consumers who need help with their debt to look for programs that are not for profit over those that are because many of the programs looking to make a profit are scams or don’t have the customer’s best interests at heart.
Consumers should also keep in mind that even when an organization is not-for-profit, that doesn’t always mean it’s trustworthy or that ALL its services will be available free of charge. Many of these organizations still have minimal fees for some select services or they might still try asking for donations.
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How These Companies Help Consumers Relieve Their Debts –
There are several strategies debt management and relief organizations use to help customers with their debts. We’ll list a few of them below:
Teaching Proper Budgeting –
This is the most important feature that any debt organization should have. If it doesn’t, it’s better off being avoided entirely. The reason consumers get into debt is that they don’t have the right spending habit. They spend more money than they earn, and this habit leads to debt, which then gets worse and worse. Although other strategies can help a consumer with existing debt, they only treat the symptom, not the actual problem. Learning budgeting will help the consumer make better choices financially and avoid future debt.
Debt Consolidation –
This is when multiple debts are paid off with one method, such as a loan. The consumer will then only have one payment to make every month instead of multiple payments, and the loan could have a lower interest rate than some of the debt he was paying back. This could backfire though and it’s really important to make an educated decision by reading the fine print and making sure the interest rate is less. If not, then you are just taking out more debt to pay off the debt you already have. It’s simply just moving the debt around.
Negotiating Debt Terms –
Agencies that help with debt will often contact creditors on the consumer’s behalf to negotiate better terms on that debt. This could mean getting lower interest rates or getting rid of fees that a credit was charging the consumer, such as late fees. Most of the time the credit card companies already have a program in place and will only allow certain concessions to be made, so sometimes the credit counseling agency can’t really negotiate and they can just take the creditor’s concessions which should include lower interest rates.
Preventing Collection Calls –
If the consumer is getting collection calls related to his debts, an agency may be able to put a stop to those. They typically do this by explaining that the consumer has a plan for paying off his debt and requesting that the calls stop so that he gets a chance to pay back what he owes.
The consumer can use all these strategies himself when working on his debt, but there are often better results when professionals handle it. It’s important for consumers to do their homework on any organization they’re considering using to make sure they choose the right one, and they should go with non-profit debt relief over the for-profit alternative.
More Info About Each One –
Facing a looming financial crisis due to heavy credit card use or other debts can be a stressful situation for many people. Fortunately, there are many credit and debt counseling programs available to help folks navigate a path through this frightening storm. While most of these credit and debt counseling services are offered by businesses looking to earn profits, many are available through non-profit organizations. Both Non-Profit versus For-Profit Debt Repayment Plan options offer advantages and disadvantages. It pays to examine each carefully to find the type that best matches your particular situation.
Non-Profit Debt Relief –
Non-profit credit and debt counseling agencies exist to provide expert advice and to help consumers find ways to better manage their incomes and expenses. They offer their services completely free of charge. With no underlying profit motive, these non-profit services are understandably limited in terms of what they can do for you beyond talking to and advising you.
For folks who really just need someone trained in financial areas to assist them in setting up workable budgets and to design debt repayment plans under their existing conditions, a non-profit credit and debt counseling agency is probably the best choice. If, however, you find yourself so deeply in debt that you are certain your only recourse is finding a way to reduce your debts and lower your monthly payments immediately, a for-profit credit and debt counseling company might be the way to go.
Also, imagine only writing one check each month (to the credit counseling company) instead of all those checks to each creditor. The overall picture is one where both you and the credit and debt counseling company will come out winners. Just be sure to compare the reputations, services, and prices at each company you’re considering before making a final decision.
For-Profit Debt Relief –
For-profit credit and debt counseling businesses may have a better chance reducing the amount of your principal balance you owe to each creditor. While these credit and debt counseling companies will charge you fees and interest charges for their services, it is often a small price to pay for the amount of savings you will realize over the years.
Consider that the company should work hard to negotiate with your individual creditors to get them to reduce the amount you owe. Add to that the fact that you will most likely be paying a much lower rate of interest to the credit counseling company than you are currently paying on your credit card debts.