How a nonprofit differs from a "normal" company
Organizations and corporations are normally established to make money which belongs to the shareholders through stock ownership. They exist to earn a profit, and that is their primary goal. On the other hand, a nonprofit organization is not in business to make a profit and is a private entity, not a public one. Rather than making money, its sole purpose is to provide services and programs that benefit the public at large.
In some cases the services they provide are not available elsewhere, or those services are available at a cost that prohibits many people from having access to them. If a nonprofit actually does earn a profit, it is usually called surplus which must be retained for future use by that organization.
Do nonprofits charge for their services?
Many nonprofits charge for their services to fund their operations. While they also rely on contributions and other assistance, this is usually not adequate to cover all of their expenses. The good news is that the fees charged will be less than you would pay for the same service received from a business for profit. In some cases, a fee will not be required, but the nonprofit may solicit “voluntary” donations as a way of covering their budget shortfall. However, they are not allowed to pressure you or make you feel guilty should you decide not to donate. They are permitted to post a suggested contribution schedule which often provides a range of amounts depending on the service provided.
What services do they provide?
Video: How Credit Counseling Helps
The main goal of a credit counselor is to provide immediate and lasting relief from your debt problems. The ways in which they do this depends on your particular situation and the type of help you need. If you are having trouble making ends meet, they can help you analyze your monthly budget. This consists of a thorough review of your itemized expenses and a comparison of those to your projected income. Based on this analysis, they will make recommendations on how to adjust your current and future expenses to fit within your income.
A debt management program that includes a budget and expenditure profile could be tailored to your unique financial circumstances. This program usually requires you to send the agency a lump sum of money which it will distribute to your creditors every month. In exchange, you should expect the elimination of delinquency fees and lower interest payments. You would still be expected to pay back your outstanding balances, but the savings in finance charges could be considerable. The downside to this is that many credit card companies consider credit counseling as they would a bankruptcy when granting new credit. They look at counseling as a red flag on your credit report which could make it much more difficult to get credit cards in the future.
Counselors can also offer advice for consolidating your debts when existing credit card and loan payments can’t be met. This is accomplished by combining multiple payments on your existing accounts into one, lower payment on a single account with a lower interest rate. It may also be possible to extend the payback period in order to reduce the monthly payments. You will pay your outstanding balance off over a period of several years according to a payment schedule that fits within your budget. In some cases it may be better to seek a settlement of your debts before seeking counseling since a settlement could close the debt once and for all without negative consequences.
Advantages/disadvantages of a nonprofit
Non-profits enjoy special tax advantages which they must qualify for by offering education and counseling services. But some of them have used their status to evade consumer protection laws and deceive unsuspecting consumers. Since some counselors receive fees from creditors based on a percentage of the amounts repaid, they may be motivated to enroll consumers in debt management plans whether they really need them or not. You should not feel pressured in any way to do something that does not pass the common sense test. This industry is not heavily regulated so it is up to you to do your own homework.
Nonprofits will typically cost you less than hiring a company whose business model depends on the profits generated by providing credit counseling. But the fact that they are nonprofit does not necessarily mean that they have your best interests at heart.
Things to look for
The fact that a counseling service is nonprofit does not mean it is more capable or trustworthy than normal companies. You should still do your own research and go through the same steps that you might use before you contract with any new company. Ideally you would get reliable references from people you trust and do a thorough evaluation based on those references. They should be able to give you input on the capability of the staff, customer service performance, and their overall reputation. If the references are positive, make an inquiry to the local Better Business Bureau. Find out if the service has any outstanding complaints or pending legal actions.
Video: Tips for Choosing a Credit Counselor
Use the internet to acquire information from the websites of the companies you are considering, and do your own analysis that compares these companies to each other. Also review the relative cost of your options and whether or not you will be getting the services you need at a reasonable cost. Avoid those companies that seem to promise more than you think they can realistically deliver. When you decide to contract with an agency, make sure all agreements and service fees are in writing and that your creditors will work with them. Once the service starts, make sure that any payments you are making to the counselor are being used to pay your bills.
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