Nonprofit debt consolidation companies help people combine unsecured loans into a single monthly payment. Their counselors help you make a financial plan. They may even be able to reduce interest and eliminate some fees.  

  • Nonprofits focus on different strategies to deal with your problems than for-profits 
  • They have both counseling and debt management plans to help you 
  • Make sure that the company you choose to work with meets the industry standards 

Beware of scams, though. Whatever company you choose to work with make sure they are legitimate. If they ask for upfront fees or give you a sales pitch to buy one of their services right from the start, then go somewhere else.  

Nonprofit Vs. For-Profit Debt Consolidation Companies 

While the goal of both nonprofit and for-profit companies is to help you get your liabilities under control, their profit motives are different. Non-profits don’t earn income, so they don’t provide services that will generate revenues. For-profits rely on services that generate income streams in order to stay in business. Both can help you consolidate your balances into a single payment, but: 

  • Nonprofit – develops a debt management plan. You pay the company, and it distributes the funds to your creditors. 
  • For-profit – Combines your liabilities into a single loan, and you pay directly to your new creditor. 

Watch out for scams with either type. Be careful when looking for someone to help you with your balances because there are many fraudulent companies. They prey on desperate people who grasp at anything to help them out of their situation.1  

Nonprofit Debt Consolidation Services 

Nonprofit debt consolidation companies provide many services. You should find one that offers a free consultation where a counselor reviews your situation and offers strategies for how to deal with your problems. They should have free resources for you to learn about budgeting, money management, and other counseling services. The most important thing they do, though, is to provide you a debt management plan (DMP) that: 

  • Evaluates your financial position. 
  • Makes a budget you can afford on your income. 
  • Creates an account with them so that you make one payment to them, and they distribute funds to your creditors. 
  • Negotiates on your behalf to reduce interest rates and eliminate finance charges and late fees. 

As you can see a reputable organization may be able to help in a variety of ways. Counseling is important to help you make a budget and stick to it, and DMPs are very powerful tools to help you get out of trouble, often within 5 years depending on how much owe. 

What is a DMP? 

A DMP lumps your unsecured balances into a single payment, may cut your interest rates, and gives you a structure so that you can pay off your credit card bills usually within five years. These plans: 

  • Cover unsecured liabilities, like credit cards and personal loans 
  • Becomes the payer on each of your accounts 
  • Seeks concessions from each creditor for lower interest rates, lower monthly payments, and late fees 

These plans do have enrollment and monthly fees. You should ask about these before you sign up, but they are almost always lower than the money you will save from their services. Also, you usually must cancel your credit cards when you enter the program. Most credit card issuers require this.  

Avoid any new loans. Your creditors may see these obligations on your credit report and withdraw their concessions. Further, always make your payments on time. Since they made concessions, your creditors will insist that you meet the terms of the agreement. If you miss a payment, they may assess late fees again and raise the interest rate again.2  

Advantages and Disadvantages of DMPs 

DMPs are great options under the right circumstances. It is a great program if you have a regular income and high balances on unsecured loans, such as credit cards. Here are some advantages: 

  • A single, low payment 
  • No collection calls 
  • An accountable plan to put debt behind you 

On the other hand, it is not always the best way to go. If you are unemployed or can’t work, then you should think about bankruptcy. Also, if your problem is because of secured loans, such as a mortgage or car loan, then DMPs can’t help you, either.  

Standards for Nonprofit Debt Consolidation Companies 

Nonprofit debt consolidation companies should adhere to the standards set forth by the National Foundation for Credit Counseling (NFCC). These organizations promote financial responsibility by providing counseling services and personal finance education. The standards for the NFCC include: 

  • Annual audit of operating and trust accounts 
  • Licensed, bonded, and insured 
  • Meet all consumer disclosure requirements of the Federal Trade commission 
  • Make services available regardless of ability to pay 

There are many scams out there, so be careful to find an honest company to help you. The NFCC is a good place to start, but if you look elsewhere only work with a company that: 

  • Is a 501(c)(3) organization 
  • Doesn’t charge an upfront fee 
  • Doesn’t have a poor rating with the Better Business Bureau 
  • Is licensed in your state 
  • Offers free credit and budget counseling 
  • Doesn’t have aggressive sales pitches or “quick-fix” solutions 

You should always check the validity of any organization you work with. A good company will be patient with you and answer all your questions before they begin telling you about their services. If they focus on selling you programs and services upfront you should go somewhere else.3  

Final Thoughts on Nonprofit Debt Consolidation Companies 

Nonprofit debt consolidation companies can be a very big help if you have out of control credit card balances.  Their counseling services help you maintain a workable budget. DMPs directly deal with your existing unsecured liabilities problem work very well for many people. 

If you don’t have enough income to meet the DMP monthly payment, then you should consider bankruptcy instead. Also, if you face foreclosure, then this is not a good program for you either.  

If you do decide to work with one, then make sure it is a legitimate company. If they want up-front money or tell you a story too good to be true, walk away because it’s probably a scam. Make sure the organization is legitimate. 


  1. Consumer Credit 
  2. Nerd Wallet