There is a big misunderstanding that debt consolidation and debt relief companies are free just
because they are qualified as "non-profit" companies. The truth is that they are not! Even
non-profit companies do charge, however, they do typically charge LESS than a "for profit" company
because they don't have shareholders to report profits to.
Most debt relief and debt consolidation companies do indirectly charge you money, they all make
money but in different ways. The good news is that many of them don't require you to put a lot of
money out of your pocket - they can finance their charges through your debt consolidation (but only
some of them).
Many are also very strict, if you miss even ONE monthly payment, you are kicked out of the program
and you also lose your up-front payment.
First of all there are two kinds of debt consolidation services:
1. Non-profit
2. For profit
Both of them make money, but in many different ways. Some charge you directly, some take a "portion"
of what they save you. The "truly free" services are usually only the ones offered by your local
church or religious institution.
Here is how most companies make money:
1. They charge you a small amout up-front for the coaching. They usually role their fee into
your final debt consolidation amount that they help you get.
2. They charge you a percentage of what they save you, hence you save less - this also gets
rolled into your final debt amount.
3. They do both.
Bottomline is that they DO save you more money than they charge, and usually you don't have to put
anything from your pocket. Either way, make sure you understand that the service is NOT free, you
ARE paying for it.
The only reason they are called non-profit is because they do not declare a profit at the end of the
year. This DOES help you because it means that they are charging far less for their services.
