If you’ve had a recent setback and are struggling to keep up with bills and credit card debt, it can be worth it to talk to a professional. Credit counseling is a good first step to getting a handle on your budget and debt repayment.

Nonprofit debt management companies have relatively low fees and can help you restructure your debt so it’s easier to pay off. They can create a debt management plan (DMP), so you’ll have a single payment each month. Read on to learn more about how it works, the top companies offering this service, and what types of debts are eligible.

How Can a Nonprofit Help Manage Your Debt?

Nonprofit organizations can help you with debt management by providing you with financial counseling and advice.

“Nonprofit debt management works very well for a consumer with a healthy financial outlook, who’s not struggling, but looking to come up with a financial plan to get out of debt sooner rather than later,” says Teresa Dodson, a debt expert and the founder of Greenbacks Consulting.

These organizations can help you create a budget, negotiate with your lenders, lower interest rates, and suggest which type of debt relief is right for you. Here are some of the services they provide.

Debt Management Plans

Nonprofit debt management usually starts with a credit counseling session with a certified counselor. Your counselor can set up an agreement with your creditors, where you’ll make a single payment each month to the nonprofit agency, and the funds will be distributed to your lenders.

With this type of debt management program, you’ll be able to benefit from waived fees and penalties and lower interest rates. You’ll still have to repay your debts in full, but you may be able to pay them off sooner, usually in five to seven years. 

Debt Settlement

Some nonprofit organizations also offer debt settlement, which allows you to eliminate debt by repaying less than you owe. This is a viable option if you’re behind on your payments, have a lot of debt, or are at risk of bankruptcy.

With nonprofit debt settlement, your lender will agree to a settlement offer. The payments are spread out over several months, typically 24 to 36 months, so you won’t have to make a lump-sum payment. Once you make all the agreed payments, your account is settled.

Debt Consolidation

With nonprofit debt consolidation, you won’t have to take out a credit card or debt consolidation loan to combine debts. Instead, you’ll work with a nonprofit company that will set up a plan based on your budget.

Your counselor will negotiate with credit card issuers to lower your interest rate and propose a repayment plan, so you’ll have a single monthly payment. However, this type of debt consolidation only works if your lenders agree to the arrangement. You’ll also need to close your credit cards once you enroll in the program.  

Other Debt Management Options

Other than the options listed above, nonprofit organizations also offer credit counseling services if you just need professional guidance on how to repay debts. Your counselor can take a detailed look at your budget and suggest what type of debt relief options may work for you.

Credit counselors may also suggest hardship programs when available or bankruptcy if your debt is overwhelming and there are no other options available.

Types of Debt a Nonprofit Debt Consolidation Company Can Help You With

Nonprofit debt consolidation and debt management companies can only help you eliminate unsecured debt. Unsecured debts are ones that aren’t tied to collateral. You can enroll in a debt management or consolidation program if you have debts like:

Debts Not Eligible

Certain debts can’t be included in a debt management plan. These include secured loans, like car loans and mortgages, that are tied to collateral.

You also won’t be able to include tax debt and student loans in a debt management plan. If you mostly have secured debt, debt management or debt consolidation may not be good options.

7 Reasons To Use a Nonprofit Debt Management Company

There are a number of benefits of enrolling in a nonprofit debt management program, including:

  1. Nonprofit debt management companies act in your best financial interest.
  2. They’re accredited by the National Foundation for Credit Counseling (NFCC).
  3. Counselors will review your debt, income, and expenses, create a budget, and suggest ways to reduce expenses and repay debt.
  4. Trained counselors can educate you on money management, how to improve your credit score, and how to use credit responsibly.
  5. You can enroll in a debt management program even with bad credit since you won’t have to take out any new credit cards or loans.
  6. Your counselor may be able to waive fees and penalties and lower interest rates.
  7. You’ll only have to make a single payment each month, making it easier to repay debts.

Nonprofit Debt Relief vs. For-Profit Debt Relief Companies

When it comes to debt relief, you can work with a nonprofit or for-profit company. Nonprofit companies can provide you with financial education, lower interest rates, waived fees, and guidance on how to get out of debt.

However, you’ll also need to close your credit cards when you enroll in nonprofit programs. Debt management plans may also take longer to complete, and if you have a lot of debt, they may not reduce your burden as much. You’ll need to pay a setup fee and monthly fee to enroll in the program.

When you work with a for-profit company, you may be able to get out of debt sooner if you opt for debt settlement. Many companies also have success-based fee structures, which means that you won’t have to pay upfront, and you’ll pay based on how much you save. For-profit companies may be able to negotiate settlements that save you as much as 50% of your debt before fees.

3 Best Nonprofit Debt Management Companies

We reviewed 15 nonprofit debt management companies and chose our top three recommendations based on factors like fees, services provided, customer reviews, and geographic availability.

American Consumer Credit CounselingCredit.orgMoney Management International
Fees$39 enrollment fee and $7-$70 monthly feeUp to $50 enrollment fee and up to $75 monthly fee$33 enrollment fee and $25 monthly fee
BBB RatingA+A+A+
AvailabilityAll 50 states and Washington D.C.All 50 states and Washington D.C.All states and territories

Look for Nonprofit Debt Management Help

If you’ve accumulated a lot of unsecured debt, are unable to make more than minimum credit card payments, and are looking for relief, nonprofit debt management is a viable option. Speak to a certified counselor to determine the right debt relief option.

When choosing a nonprofit debt relief company to work with, check to see if it’s an NFCC member, reviews and ratings on sites like Better Business Bureau (BBB), as well as fees. Once you enroll in the program, you’ll need to be committed till the end.