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Non-profit Debt Consolidation

Non-Profit Debt Consolidation Program

What is a Non-profit Debt Consolidation Program

A non-profit debt consolidation program (also known as a debt management plan, debt management program, credit counseling program, non-profit credit counseling program) is a creditor sponsored program that has been advertised as helping individuals who are falling behind or having “trouble” paying their minimum payments each month.

To qualify for this program, typically the individual with the debts has to make at least a 2% minimum payment each month plus a fee to the credit counseling agency. In certain cases, credit counseling agencies may charge a monthly fee as high as $79 a month for their services. They then make one payment to the creditors each month. In the past, creditors would lower the interest rates a lot (even to 0%), but in recent years, the creditors do not lower the interest rates as much, some do not lower them at all, and some do not even work with non-profit debt consolidation plans. Also, on this program, if one payment is missed or late, the creditors may kick the individual out of the program.

The credit report still shows that a third party (the debt consolidation credit counseling agency) as paying the accounts. While interpretation is different from one lender to another, some lenders equate the credit rating on this program to a chapter 13 bankruptcy.


A caller was considering a debt management program. She had $22,000 in debt and was making a payment of about $440 with interest rates on average of about 16%. She was feeling like she was going no where with the minimum payment and the balances were not going down. She had been paying for 18 months on the accounts already (e.g. she had paid back $7,920 and the balances did not move). A few hundred dollars per month would make a big difference in her lifestyle and give her more peace of mind. She had heard about debt management on TV and figured if it was on TV it must be a good program.

They had gone in to speak with their local consumer credit counseling agency. The woman the caller spoke with told her that the credit counseling program was the best program out there to help the individual with their debts because it would, “lower their interest rates, stop over the limit fees, and get them debt free in a much shorter time.” The credit counseling agency went on to explain that “any other program out there will damage your credit and with a consumer credit counseling program there is no affect on your credit at all.” The new payment would be $485. She was very detail oriented and got a breakdown. This would be $435 to the creditors per month plus $50 monthly fee to the credit counseling agency for 70 months. All done, she would pay $30,450 including $3,500 in monthly fees to pay off her original debt of $22,000. She was skeptical but the credit counseling agency was very convincing and encouraged her to get started right then and there. She decided to investigate further.

She had a good friend who was a lender and she asked, what could be the affect on my credit? The lender explained, “There are two things you must understand. One is credit score, and the other is credit worthiness. Right now you have a high credit score but you have $22,000 in debt and are just paying minimum payments and interest. The debt isn’t going anywhere. You are not credit worthy and I (nor anyone I know) would not give you a loan because you can’t pay it back. Additionally, if you enroll in a credit counseling program, many lenders look at that as a chapter 13 bankruptcy because it is essentially the same thing. So, my recommendation is that if you can pay your unsecured debts off in full, or make more than the minimum payments to be done quickly, do that first. If you’re treading water on your debts, while I used to recommend consumer credit counseling 20 years ago, the program now doesn’t work well. The creditors don’t reduce interest rates much – they used to go to 0% in some cases, so it’s actually worse than just paying more than the minimums. My suggestion would be to speak to a reputable debt settlement company to see if that would work for you so that you can get your debts taken care of faster and with a greater savings to you. Then, when you are done, keep on saving the same amount in a savings account so that you have cash and can depend less on credit. I give you this advice as a friend who makes his money giving out loans – I don’t want to see you enslaved to creditors as I see so many people. Then, if you want to get a home loan, car loan or other large loan, you can do so much more comfortably and not risk losing your home or car because you can’t afford the payments.”

She decided to go with the CuraDebt debt relief program for money savings, lower payment, and overall more flexibility.

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