Credit Counseling: Advice When You Need It

June 24, 2019

There’s nothing easy about debt. Understanding it, paying it off, and staying out of it are all challenges for consumers across the United States. This is evident in the fact that U.S. consumers have over $420 billion in cumulative revolving credit card debt. Carrying a significant amount of high-interest debt can totally change the way you live and plan. Credit counseling is one option that can be a huge help to individuals struggling with their debt.

What Is Credit Counseling?

Credit counseling is a type of service that exists for individuals who’re struggling to make ends meet financially. There are a lot of different services available to consumers through credit counseling agencies. Credit counselors can help consumers make a budget, access their credit reports and find a debt management plan.

The most basic aspects of credit counseling are typically offered free of charge; but certain additional programs can cost money. Make sure you understand the terms offered by any given credit counseling service before you agree to anything. These are some questions the Consumer Financial Protection Bureau suggests people ask before working with a credit counselor:

  • What services are you offering?
  • What can you offer me for free?
  • Are you accredited?

How Can Credit Counseling Help You?

Talking with a credit counselor is going to give you some methods for dealing with your debt. One of the most important things a credit counselor can advise you on is how to create a budget. Data has shown that only around 40 percent of U.S. households use a budgeting system. A credit counselor will be able to give you advice on how to put together—and stick to—a budget. Doing this can save you hundreds, or even thousands, of dollars each year.

There are some further services that might be offered through a credit counseling service. A credit counselor can help get you a copy of your credit report and offer you some other resources, for instance. It should be an immediate red flag if the credit counselor won’t give you anything, even information, for free—as this often means they’re some sort of predatory agency.

Debt Relief Might Be the Next Step

Many people still won’t be able to get their debt under control by talking to a credit counseling service. Debt relief services are typically the next step for individuals who need additional aid. There are many debt relief agencies out there; but not all of them are the same. Just like with credit counseling, you want to feel out a debt relief service before you agree to work with them. Some agencies exist primarily as a predatory force, while others, like Freedom Debt Relief, have a proven track record of helping enrollees settle their debts.

Debt settlement is an option for people struggling to keep up with repaying unsecured credit—perhaps finding themselves unable to even pay the minimums due each month on their balances. Since debt relief agencies have experience negotiating with creditors, they can often help clients get more favorable terms on how much they owe. Of course, this course of action will require a commitment on your end to make monthly payments into a special account until you have enough to begin negotiations—a process that often takes 24 to 48 months.

Another option for dealing with debt is consolidation. There are a few different forms. One entails taking out a loan, using it to repay high-interest debts, then focusing on repaying the loan with fixed terms over time. Another is conducting a credit card balance transfer, where you transfer your debts from a high-interest card to one you’ve just opened with low or no interest. Just be aware these introductory periods usually end after six months or a year, after which you’ll find yourself amassing interest yet again. You’ll also pay a fee per transfer.

There are a lot of benefits to talking with a credit counseling service. You might want to do this even if you’re not yet to the point where your debt feels out of your control. The sooner you create a plan for tackling your debt, the sooner you can eliminate it from your life.

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