As debt problems in America grow increasingly worse, more and more companies are forming to help people to manage their debt problems. A common solution to debt issues is debt consolidation, and many of the organizations that have formed to help people consolidate their debts are non-profit organizations.

The term “non-profit” can lead consumers to believe that the debt consolidation companies are helping without a thought of making money. This is not the case, and consumers need to be careful of which non-profit organization they use to help with debt consolidation.

It’s important to understand that just because an organization is set up as a non-profit, it is not necessarily a charity. Being a non-profit strictly means that the organization is not allowed to make money off of an individual. They are allowed, however, to cover expenses by charging fees to their customers, and it’s a common practice to inflate expenses so that higher fees can be charged. There are tax advantages for non-profit organizations as well. It’s vital to understand that these organizations are making money through the work they do.

There are several advantages to using a non-profit debt consolidation organization. The first is that most of these organizations know what they’re doing. They have tools and resources that allow them to analyze consumer’s situations and recommend the consolidation program most appropriate for their specific case. These organizations also know how to deal effectively with creditors, as it’s a core part of their business, and are able to take on the hassles that most borrowers aren’t interested in taking on.

Second, their debt consolidation plans can help consumers get out of debt in a relatively short period of time. Third, these organizations simplify borrower’s financial lives. Instead of making several payments to different companies, the borrower makes only one monthly payment, which the non-profit group directs to the appropriate debts.

There are downsides to working with non-profit debt consolidation organizations too. First, this process can be costly. Don’t let the term “non-profit” fool you, these companies exist to make money. Most of these companies charge not only an upfront fee to get started, but a monthly fee that is paid as you progress through the program. There is no promise of positive or timely results, but the fees are charged nonetheless.

Second, a debt consolidation plan can lower your credit score if your creditors become aware that you consolidated your debts. If the debts are successfully paid off, your credit score in the long run will improve, but short term you may see your score decrease.

There are several very good non-profit organizations that provide excellent help and service with debt consolidation. The consumer’s job is to research the various options that exist and work only with organizations that can show a track record of successfully helping people get out of debt. There are several good options but also several companies to watch out for. Spending time doing your homework will ensure you don’t regret this important decision.