Here’s When It Makes Sense to Talk to a Credit Counselor
If you ‘re struggling with overwhelming debt and bills, you may find it difficult to get your finances back on track on your own. This is where debt counseling services and credit counselors can provide invaluable help and advice.
Credit counseling organizations are typically non-profit groups that provide consumers with a range of money management services and educational resources. Their advisors are certified professionals who can give you expert and objective advice on how to handle your specific financial situation. All the money you pay goes directly toward your debts, but there may be additional costs associated with using such a program. There is often an installation fee of up to $75 and an ongoing monthly fee of $25 to $75. Here are some of the main services that credit counseling agencies offer.
Working with a credit consultant
Credit counselors can review your income, expenses, debts and overall financial situation to help you create a personalized budget and spending plan. This can make managing your money much easier and put you on the path to financial stability. By law, anyone considering bankruptcy must first obtain credit counseling from an approved agency. An advisor will review your options and provide an objective perspective on whether bankruptcy may be the best solution for your situation.
If you have multiple high-interest debts, a credit counselor may recommend that you enroll in a debt management plan (DMP). With a DMP, you make one monthly payment to the agency, which then distributes the funds to each of your creditors. The agency also negotiates to lower your interest rates. DMPs allow you to pay off debt faster and at a lower cost.
Another option to consider is credit counseling groups, which offer a variety of free personal finance seminars, guides, online tools and other educational resources to help consumers improve their money skills.
When is credit counseling right for you?
So when exactly should you contact a credit counseling agency? Here are some signs that you might want to use their services:
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You are constantly late paying bills or skip payments completely.
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You make only the minimum payments and your debt level does not decrease.
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You receive calls and letters from debt collectors
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You use credit cards to pay for essentials like food and utilities.
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You can’t save money for emergencies
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Are you considering bankruptcy but want to explore alternatives?
The biggest benefit of working with a credit counseling agency is that you will receive free or low-cost expert advice from an objective third party. Advisors aren’t trying to sell you anything—their role is simply to educate you and help you regain control of your finances.
Bottom line
Don’t let debt become an overwhelming burden. If you’re struggling to pay off your debt, consider contacting a qualified (crucially, non-profit) credit counseling agency. They may offer you a debt management plan in which they negotiate lower interest rates and fees with your creditors.
Most credit counseling agencies have a legal obligation to provide truly independent advice to consumers. However, it is still wise to do some research on any organization before engaging its services. Check out qualified nonprofit credit counseling agencies here .