Personal finances and debt can be difficult to manage. However, numerous options are available for residents who are looking for relief from debt.

Although, not all debt relief options are suitable for debtors. Some are only beneficial for those in certain financial circumstances.

To find the best option for dealing with debt, residents should research their options thoroughly. One helpful resource for those who do not have much experience with finance is a credit counseling agency. Debtors who need debt relief but do want to do anything drastic can begin with getting advice from a credit counseling agency. Credit counselors provide assistance in numerous ways including advising clients on how to best manage their finances as well as providing budgeting tips. Many agencies also offer educational materials for free, obtain credit report and score copies and create debt management plans.

Going to a credit counseling agency is a good first step to achieve debit relief and improving a financial situation. Often, these services are available for free at low costs and can be found within non-profit organizations. For some, going to a credit counselor may be enough to get them on the right track with their finances while others will need to take additional steps to reduce their debts. Continue reading below to learn about credit counseling and determine if it can be a beneficial option.

What are credit counseling agencies?

There are a number of services offered by credit counseling offices that residents in debt can take advantage of. In addition, credit counselors offer assistance for credit building and personal finances. The purpose of these services is to help clients understand what they can do about their debts and how they can improve their financial situation. Usually, credit counselors will create a personalized financial plan with their clients that targets their specific needs and goals.

Different types of agencies and organizations offer credit counseling. These include religious organizations, credit unions and non-profit agencies. Most agencies offer similar services for clients. One of these services is budgeting assistance. This is often done during an initial session with a credit counselor. During this step, the creditor assess the client’s income, expenses and goals before creating budget or advising additional steps. Furthermore, residents undergoing bankruptcy can meet with a credit counselor as well. In fact, debtors considering bankruptcy are required to attend counseling prior to filing. Additionally, residents can obtain counseling for specific finances such as student loans or housing. With student loan counseling, debtors can learn about different options for managing their debts, forgiveness options, repayment plans and consolidation. On the other hand, those seeking housing advice can learn about the different aspects of home finance management such as reverse mortgages, pre-purchases and mortgage counseling. Last, credit counselors create debt management plans that help reduce monthly payments.

Debt Management Plans

Debt management plans are frequently recommended by credit counselors to residents who are struggling to make payments. A plan of this kind helps debtors save time and money in paying their debts. However, debt management plans are not right for everyone. These plans are most suitable for debtors who have a moderate amount of credit card debt and will not need to take drastic actions to get out of it.

Unfortunately, a debt management plan cannot work for medical or student loans debts. These plans are similar to debt consolidation as both programs result in one monthly debt payment instead of several. Unlike with debt consolidation, credit counseling agencies contact creditors directly to reduce interest rates. However, clients are required to commit to a payment that can last three to five years.

Once a debtors agrees to their payment plan, they will contribute monthly payments to the credit counseling agency. Then, the agency sends the payment to the creditors. Making payments this way allows clients to have pay lower interest rates and only have to pay one monthly payment instead of several. Thus, debtors will have an easier time making their payments and sticking to the plan.

Committing to a debt management plan is not ideal for everyone. A plan like this is best for residents who are able to make monthly payments and do not need open a line of credit to support their payment plan. Moreover, there are few fees involved in debt management plans. Usually, clients are not required to pay more than $50 per month. However, a credit counselor can determine if a debt management plan is the right option.

How to Select a Credit Counseling Agency

It is usually easier to find a credit counseling agency than organizations that perform other types of financial services. Reliable, non-profit credit counseling agencies are accredited by the National Foundation for Credit Counseling. Accredited organizations hire certified counselors who can provide professional assistance. Clients can obtain educational information and numerous counseling services for a low cost or even for free.

The first appointment with a counselor is typically the consultation and is usually free of charge. Thus, there is little risk for debtors to begin using the service. However, not all residents who have outstanding debts need to visit a credit counselor. Debtors with the following circumstances should consider seeking a credit counselor:

  • They are considering bankruptcy.
  • They are looking for assistance with their finances.
  • They are struggling to make payments on their credit cards and other debts.
  • They have been denied an unsecured loan.

Residents are encouraged to verify with their state attorney general or local Federal Trade Commission (FTC) about any negative comments, reviews or complaints filed against a given agency. It is important to ensure that a company is certified and accredited before working with a credit counselor. It is important to avoid agencies that charge for educational materials without providing services as well.  In addition, a reputable agency is typically also a non-profit organization.

There are often various ways to contact and obtain access to a credit counseling agency. Some offer initial consultations to be conducted by phone or online while others only offer in-person meetings. Prices vary by agency, state and service.