When it comes to debt relief services, there are unfortunately very many predatory companies and organizations out there who don’t hesitate to take advantage of innocent customers. It’s deeply troubling that someone would conspire to purposefully take advantage of individuals who are in debt, yet it’s all too common.
That’s why a lot of people take great pains to seek out reputable companies to work with, and that’s especially true for people looking into debt consolidation for the first time.
One way people try to narrow down their search is by looking for non-profit organizations who do debt consolidation. It stands to reason that non-profit organizations would be more trustworthy when it comes to debt consolidation. After all, by definition they don’t have the same profit motive as other lenders, which means they should be able to raise their customers’ needs above their own money-making goals.
However, as we’ll see below, that is not always the case.
Non-Profit Status and What It Means
Most non-profits are registered as 501(c)3 organizations and are registered with the IRS. This means they can actually accept tax deductible donations. But it also means that the organization cannot take home profits.
The problem is that there are some loopholes when it comes to acting like a for-profit company. One of the biggest loopholes is that non-profit organizations can pay their employees any wage they deem to be fair. Which means that debt consolidation non-profits can pay their executives millions of dollars per year if they so choose, while still claiming their non-profit status.
The result is that many non-profit debt consolidation organizations still have a desire to make money off of their customers just like for-profit companies, because the money they make (from enrollment fees and monthly fees) can go toward paying the employees’ and executives’ salaries. But the people who come to the non-profit for help with their debt might not realize that’s the case, which is one reason we wanted to shed some light on the situation.
Debt Consolidation and How it Compares to Other Options
Despite all the murkiness surrounding it, the term “debt consolidation” has a pretty straightforward meaning. At its core, it means:
Taking out a new loan to pay off existing loans, allowing the borrower to group all their debt into the new loan (usually with a lower interest rate and/or lower monthly payments)
However, thanks to some of these debt relief companies that purposefully blur the lines, debt consolidation has come to be closely associated with (and often confused as a synonym for) debt management.
Debt management requires a person to sign up for a program run by a company or non-profit organization that contacts the person’s creditors on their behalf and attempts to negotiate lower interest rates and/or lower monthly payments. It also usually requires the borrower to close their accounts and puts them on a fixed plan to pay it all off. In return for this service, the company or organization takes a monthly or upfront fee from the person.
For some people, debt management can be helpful. However, it really depends on the situation. And too often, people get taken advantage of by companies charging high fees for their debt management programs while providing little value to their customers.
When looking for a debt consolidation company, for that reason, it’s important to look closely to see if the company really does offer debt consolidation loans or just uses debt consolidation as an advertising phrase to get people enrolled in their debt management programs.
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Reviews of Non-Profit Debt Consolidation Organizations
Let’s take a look at some companies that advertise themselves as non-profit debt consolidation providers.
It’s pretty strange that DMCC advertises itself as a “non-profit debt consolidation” organization, considering that its full name is “Debt Management Credit Counseling Corp.” Once I saw that name, I had a strong feeling that DMCC was not really in the business of doing debt consolidation, despite their claims to the contrary.
And unfortunately, I was right. The only types of debt relief services listed on their website are credit counseling, debt management, and payday loan assistance, which matches their name but doesn’t explain why they purport to do debt consolidation.
In fact, they didn’t even seem to have any educational information about debt consolidation anywhere on their website.
The second question – whether they are in fact a non-profit – seemed to have a more satisfactory answer. They do specify on their About page that they are in fact a 501(c)3 organization, which indicates that they are a non-profit and have registered as such with the IRS.
However, as mentioned above, just because an organization is a non-profit, that doesn’t mean they are necessarily going to provide you with better service or be more trustworthy.
Verdict: For me, the fact that they are advertising debt consolidation without actually providing it is a red flag. Though they do appear to be a non-profit, I’d proceed with extreme caution when dealing with this organization.
2. Consumer Credit
With Consumer Credit, we have another company that advertises non-profit debt consolidation but doesn’t show any indication of actually providing debt consolidation loans. Their website offers several services, including debt management programs, credit counseling, and bankruptcy counseling.
While they do have several pages of educational information related to debt consolidation, these pages are skewed toward persuading people to sign up for their debt management programs.
This seems to be another example of an organization that is capitalizing on customer interest in debt consolidation loans and then directing them to debt management programs instead. While debt management programs can be helpful for some people, it’s disingenuous to equate these programs with debt consolidation.
With this in mind, I was curious to see if their claim to be a non-profit organization was based on equally shaky ground. I combed through their website and after a bit of searching I did find some confirmation that they are in fact a non-profit organization.
Consumer Credit is apparently run by an organization called “American Consumer Credit Counseling (ACCC)”, which according to their website is registered as a non-profit group. However, it bears repeating that non-profit status alone does not make an organization trustworthy.
Verdict: Despite the fact that Consumer Credit is run by a non-profit group, I would advise people to look for other options. They advertise debt consolidation but appear to be focused entirely on debt management plans and credit counseling. The lack of forthrightness does not bode well for how they treat their customers.
Like the two organizations mentioned above, Pioneer advertises themselves as a “Non-Profit Debt Consolidation” company. At first glance, when I saw Pioneer’s website, I thought they might actually provide debt consolidation loans, because they point people directly to an online application for online debt consolidation.
However, upon looking closely at the application itself, it became clear to me that this was actually an application for a debt management program. The application asks you to submit details like your monthly budget (broken into different categories) and at the bottom it says “counseling application” instead of “loan application.” Like the companies above, Pioneer seems to be using debt consolidation as a means to attract new customers without actually offering any debt consolidation loans.
Their website has several articles about debt consolidation, but these articles talk more about debt management and don’t really explain debt consolidation in a comprehensive or clear manner. The services that they do seem to provide are debt management and credit counseling, and their website focuses on these.
Fortunately, they do have evidence of being a non-profit organization. Their “About Us” page clearly states that they are a “non-profit credit counseling agency with over 30 years of experience.” I saw no reason to doubt that this is true.
Verdict: While the website for Pioneer looks a little more consumer-oriented than some of the other ones, and while I respect their 30 years of experience, I’m still troubled that they advertise debt consolidation without fully explaining to their customers what it means and without actually offering debt consolidation loans. For that reason, I’d recommend caution when dealing with them.
Where to Find Reputable Debt Consolidation Loans
Ultimately, you want to work with a company that is reputable. We have two companies in particular that we have partnerships with: Lending Club and Prosper. We highly recommend either of these companies because they both have a history of being trustworthy and treating customers fairly. Their services are very straightforward and you know exactly what you are getting before you sign on the dotted line. Fees and interest rates are specified upfront and there are no surprises. You can read our review of Lending Club here, or our comparison of the two companies here.
For more information about debt consolidation in general, check out our Debt Consolidation Resource Center or ask us questions in the comments section below.
NOTE: Some links in this article (to Lending Club and Prosper) have referral codes that allow us to get paid a small referral fee when we send new users to a partner site. With that said, we never recommend any product or service unless we think it is trustworthy and has the potential to help our readers.
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