Debt consolidation is the process taking all the debt that a person has accumulated and consolidating it into one single payment. Interest rates are usually lower, as is the monthly payment. Several nonprofit organizations have come forward providing resources to consolidate debt for those who are overburdened and in need of financial help. They can unify various debts like home mortgage loans, credit card debts, student loan debts, automobile loans, etc. into a single entity and pay it to the creditor on a monthly basis.

A common misconception regarding nonprofit debt consolidation companies is that the state or federal government institutes them in order to assist debtors to pay off their debts easily. However, any debt consolidation company can acquire a nonprofit status by declaring as much in their property tax returns. In fact, most nonprofit debt consolidation companies actually make a lot of profit and then pay a huge amount of this profit as salaries to their staff. Consequently, at the end of the year, they have no veritable profits to show, and they can maintain their nonprofit status. Needless to say, there is a lot of caution advised to debtors when dealing with nonprofit debt consolidation companies. A great many of them indulge in fraudulent practices. They may retain a portion of the monthly consolidated payment, as a result tarnishing the image of the debtor in the eyes of the creditor. Some of them may rotate the money into other mortgages and make late payments. In a critical case, such practices may entirely botch up the credit rating of the debtor.

Yet, genuine nonprofit debt consolidation companies do provide an essential service to debtors. They may negotiate with creditors to lower the rate of interest or to facilitate a simpler repayment program. Most importantly, the debtor does not have to deal with the creditors. Since repayments are made simpler, it is much more convenient to pay off the debt. In an extreme case, bankruptcy may be avoided.