Debt relief is the negotiating of debt with a creditor to accept a small, lump sum payment in place of the current balance in lieu of continual payments each month. A debt relief organization helps a customer set up monthly payment plans, while at the same time negotiates the debt with the creditor. It is often an appealing option to creditors because it ensures that they are getting at least some money from the debt. There is a rise in the competition between non-profit debt relief companies today. As more consumers are facing increasing debts, they are searching for non-profit programs to help eliminate their debt once and for all
Non-profit debt relief companies work from the funds that are offered from consumer donations. These funds typically consist of those donations made through business organizations and debtors, all of which are voluntarily. Although most companies claim donations to be voluntary, some are not. Sometimes a percentage of a monthly payment made by a customer is put towards organizational fess and not sent to creditors. Others may use the first few monthly payments to cover fees.
A non-profit debt organization offers the same services as a debt organization that is profit-based. The difference between the two is that the non-profit organization runs on charity-based donation and grants provided through their established non-profit status. An organization typically states whether or not it is non-profit on its company’s website and will refer to it organization statues.
Advantages of using a non-profit debt settlement company
- Waiving of fees. Many times a non-profit debt relief company will waive their fees if legitimate inability to pay debt can be proven by a customer.
- Security The security of the company being recognized as non-profit. An individual finds security in a company that has non-profit statues, especially when it comes to debt relief. For a company to achieve this status, it must conform to particular stipulation; this itself provides a sense of safely within this industry.
- Non-profit organizations simply do not offer promises that cannot be kept. It is common for other types of companies to claim offer such promises as improving credit scores instantly or cutting debt in half in a very short amount of time. These promises cannot always be met; therefore, non-profit organization to not make claims of promises because their status greatly depends on the feedback of customers.
- Non-profit companies are usually more objective than profit-based companies and are less likely to push a program onto a customer who does not need it.
- Support of creditors is usually given to non-profit companies, which can be advantageous when it comes to reducing interest rates and other factors from creditors.
- Smaller debt loads are taken on by non-profit companies. Those individuals who cannot find a debt relief company who will take on their debt amount can find help with these companies.
- Free credit counseling is provided by all organizations offering debt relief. There is typically there is a fee attached to it, but it is usually much less when compared to the fess of credit counseling of a profit-based company.
What does it mean when a debt relief company claims to be non-profit?
Non-profit means that a company does not have specific structures for payments or fees like those of debt relief companies. These particular companies work off donations and work on an individual’s behalf as if working for free. Many non-profit companies promote their companies as this being a number one reason an individual should use a debt relief company that is non-profit. A non-profit debt relief company works similar to a profit-based company but without the motivation of potential profit.
While a customer of a non-profit company receives budget help for free, revenue is made through customers signing up in either a Debt Management Plan or debt settlement program. A small percent each month of contributions goes to the provider and a larger percent is given to the non-profit company. There are some companies that receive government aid in the form of financial assistance to generate revenue while others run off of their donations from businesses.
Claims of working as Non-profit
Just because a debt relief company is claiming to be ‘non-profit’ does not guarantee that the services provided are legitimate, free or affordable. In fact, there are some non-profit companies that do charge fees, which often times are hidden or urge customers to give ‘voluntary’ contributions that result in more debt.
A reputable organization can advise customers on how to manage money and debt, help to create a budget and also offer free workshops and educational materials. Counselors within these types of companies are both trained and certified in consumer credit areas, budgeting and money and debt management. Counselors discuss the entire financial situation with a customer and also help him or her to create a personalized plan to solve any and all money problems.
