Are you considering entering a debt consolidation program to help you pay off debt once and for all? You might think choosing to work with a non-profit debt consolidator is the best way to avoid overpaying to consolidate debt. While in some cases, this may be true, in other cases companies pose as non-profits, but still end up collecting fees. Fees may be called “donations,” or the businesses could be subsidized by creditors. It’s important you ascertain exactly how your free debt consolidation company is funded before entering any contract.
One of the most common ways debt consolidators collect funds is by deducting a percentage of your monthly payment as their fee. In other words, if you send $700 to your debt consolidator, the entire $700 may not go to your creditors. Perhaps most of it will, but you should know exactly how much of every payment you make to so-called free debt consolidation companies is actually applied towards paying off your debt.
Ask for a repayment schedule that details exactly how much of your monthly payment will go to each of your creditors. When will your debt be paid off – exactly? Could costs be incurred in the future that may not be charged right now?
It’s entirely possible to take advantage of truly free debt consolidation help from a legitimate non-profit organization. But it is up to you to identify potential misunderstandings that could lead to overpayment for debt consolidation services or assistance you could have utilized for free. You want every penny possible to go towards eliminating debt, after all.