What Does It Mean to Get Advice on Debt Issues
Not long ago, I found myself in such a big debt that I didn’t know how to deal with it. It was uncomfortable for me to ask someone from my family or social circle for help, although I knew that I needed support so that I could objectively look at my situation. I called the debt counselor.
This is an option we mentioned earlier on Lifehacker, especially as the best alternative to scam debt relief companies that promise to boost your credit score overnight. But if you’ve never called a debt counselor (sometimes called a loan counselor) for help, it can be difficult to know what to expect. And listen, you’re already preoccupied with your financial situation – the last thing you want is to add more stress and uncertainty to your life.
To be honest, I can’t remember much that was useful from my own counseling experience – this period in my life is kind of blurred. I called Katie Bossler. Bossler has been with GreenPath Financial Wellness since 2003. She is a quality assurance specialist with 12 years of experience as a consultant.
If you’ve never spoken to a debt counselor before, here’s what you can expect, Bosler said.
The basics of your first meeting
The easiest way to find a consultant is to call the National Credit Counseling Fund or use its online form. They will put you in touch with a non-profit consulting organization (such as GreenPath). You can talk to someone from an organization near your home or someone from another country. If he’s around, you can schedule a face-to-face meeting, although phone meetings are common as well.
Your meeting should be offered at a low cost or completely free.
You will start by telling the counselor a little about your situation and sharing your main concerns. “We’re going to take the time to understand this person’s specific financial problems or even financial goals,” Bossler says. She explains that her clients have a variety of reasons to get help, from credit card debt to student loans and optimizing their budgets. “We’re really trying to help understand what this person wants their financial life to look like and what their financial goals are.”
Numbers
A consultant, with your permission, will retrieve your credit report to better review your debt. (Don’t worry: this is a “soft attraction,” so it won’t affect your lending store.) Once the consultant has verified the accuracy of your bills, you will provide additional information about your income and monthly expenses. Being able to view all of this information together helps the counselor formulate a plan with you.
If that sounds like a lot, well, maybe it’s because it is. “It’s very difficult to open up to someone on the phone and tell them about your financial life,” says Bossler; for many of her clients, this is the first time they have expressed their financial concerns to someone. Sometimes it’s an emotional experience: “For many, this is a really important moment, and we know it,” adds Bossler.
She notes that a debt counselor will only do what is convenient for someone, so if you have concerns about a certain aspect of your financial situation, be sure to report it to your counselor.
Once your advisor has a clear understanding of your financial situation, they will suggest options for actions you can take to improve it.
Next steps
Your advisor’s advice may include a debt management plan – more on that in a moment. They can also discuss options for paying off your debt or file for bankruptcy . Or, they may advise you to manage your debt yourself, providing some strategies or resources to ease the burden a little.
Bossler likens it to going to the doctor for a physical. Your doctor will make recommendations based on information gleaned from your medical history and examination, but unless there is an obvious emergency, he will only provide you with options to consider as you move forward, not a clear course of action. It is up to you to decide which path you prefer.
“We help the consumer think about which options are realistic based on their finances, credit rating and what their budget can afford, and we help them develop a strategy to tackle the debt problem,” says Bossler.
Debt management plans
Credit counseling agencies offer Debt Management Plans (DMP) as a way to make it easy to pay off debt in one payment. The agency works with your lenders to negotiate an agreement, which may include a lower interest rate or a longer maturity. Then, instead of making monthly payments to all of your separate debt accounts, you will be making one payment to your debt management plan.
Your advisory organization will handle all communication with your creditors for you, which can provide you with peace of mind if you are feeling particularly stressed. “If someone feels completely exhausted making these phone calls, or overwhelmed by what comes to him in the mail, these are common reasons why someone would choose a debt management plan,” says Bosler.
All the money you pay goes directly to paying off your debts, but using such a program can be costly. Often, setup fees are up to $ 75, with a recurring monthly fee ranging from $ 25 to $ 75.
You shouldn’t feel pressured to sign up for DMP right away. Your advisor can estimate how much faster you will get out of debt if you instead lower interest rates or payments, and can predict how setting them might affect your credit rating. “A good credit advisory agency can help you understand how this decision will affect your credit,” Bossler says. “You will get a complete understanding of the pros and cons to make your choice.”
This is also outside the scope of your judgment – a good consultant will show you how choosing a DMP or any other action to manage your debt can affect your overall financial goals.
If you do enroll in a debt management program, you can expect to be able to access your plan information online, as well as access a phone support team.
Keep in touch
For some, a one hour phone call and a few quick follow-up emails may be all you need to feel organized and ready to take action to beat your debt. But you may find that talking to your counselor regularly can help keep you motivated and encourage you to adapt your strategies more quickly if your financial situation changes.
“We know that financial health is not always linear,” says Bossler. “There is always a solution. It is not always what you want and not always the silver bullet you want, but there is always a solution. “
Have you worked with a consultant to get your debt under control? Share your experience in the comments – I would like to know about your results.