How Does Nonprofit Government Debt Consolidation Work?


Quick Answer

Nonprofit consumer debt-consolidation services are offered through independent counseling agencies. These agencies provide expert advice on matters of debt and help consumers consolidate credit-card payments, loans and bills under a single payment plan. The initial consultation includes a thorough review of personal finances. In addition to free consultations, debt counselors assist consumers in creating a realistic budget that increases savings while paying down debt.

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Full Answer

The debt-consolidation process involves negotiating reduced monthly payments with creditors to make payments more manageable. Interest rates on credit cards and loans might also be reduced, so it is essential to find out about interest-rate reductions by contacting creditors. A debt-reduction plan is typically designed to pay off debts within three to five years.

Debt-consolidation counseling offered by nonprofit agencies is provided for free as part of the Consumer Credit Counseling Service. Therefore, credible agencies do not charge consumers before providing information. However, some agencies might charge a small account set-up fee. In addition to a debt-consolidation plan, agencies also offer classes in budgeting and money management. These classes help consumers develop good financial-management habits. Before paying an agency for debt consolidation, check to ensure it is affiliated with either the National Foundation for Credit or the Association of Independent Consumer Credit Counseling Agencies.

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