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If you are interested in what debt or credit consolidation institutions offer, whether conventional or nonprofit, then you will need to learn a few important things. First of all, let’s go back to the basics of what exactly debt or credit consolidation is. Credit consolidation seeks to eliminate all people’s loans (e.g. credit card debt, student loans and medical debt) by “consolidating” them into a single loan. Thus, reducing the amount of interest involved and eliminating the risk of multiple defaults at the same time.

Moreover, aside from helping borrowers deal with their debt related obligations, debt consolidation also helps them negotiate with credit companies and offer credit counseling to anyone who wants advice.

Now, what separates conventional debt consolidating organizations and nonprofit debt consolidating institutions is that the latter offers very low interest rates to their clients, which aside from helping them deal with their debt problems, also allows them to have an easier time with their finances.

This of course brings up the question of how nonprofit debt consolidation institutions operate, and more importantly, where they get their funds to continue their operations. In theory, nonprofit debt consolidation institutions are funded by government grants and donations. This funding is what allows these institutions to offer low interest rates to their clients, and at the same time, provide credit counseling to their clients.

However, it’s also worth mentioning that working with nonprofit debt consolidation companies does have its drawbacks. For example, working with nonprofit debt or credit consolidation institutions will have a negative effect on your credit report. Another problem is that these institutions may require you to abide by a very strict payment plan.

It’s also important to point out that a lot of nonprofit debt consolidation companies abuse their status as nonprofit organizations. Some of them, for example will use their status to get around certain laws, while others will only use the “nonprofit” label to attract more clients. As this is the case, don’t automatically assume that any institution that claims to have nonprofit credentials is honest about those claims.

This does not mean however, that there is no honest nonprofit debt or credit consolidation companies. Finding the one you need is just a matter of research and a little prudence. For example, most nonprofit debt consolidation companies will spend a lot of time and require a lot of documents in order to assess whether or not you really need debt consolidation. This is one of the signs that the company you’re dealing with is serious about their nonprofit status. So be sure to take their advice seriously before making any commitments.

And finally, remember that even these organizations cannot solve your debt problems quickly. It takes time to get into debt, and it will also take time to get out. Although debt consolidation can help you avoid paying for multiple debts, you also need to remember that paying off your accumulated debts will require sacrifice and long term planning. The type of debt consolidation nonprofit organizations offer is simply there to make the whole thing easier.

Alex is a blogger for a nonprofit organization that helps families escape financial stress by means of consumer credit counseling, debt consolidation help, and educational programs