If your finances are skidding down debt row — credit card bills, rent/mortgage payment, auto loan, student loan, cell phone service, etc. — you probably need somebody to help stop the bleeding.
That “somebody” could be a certified credit counselor.
Credit counseling is a vastly under-tapped resource for people crippled by debt. A credit counselor’s goal is to educate consumers about the cause of their debt and offer solutions to eliminate it. In most cases, the counseling session takes about 30-40 minutes and can be done over the phone, online or in person.
Best of all: It’s free!
At least it is with nonprofit credit counseling agencies like InCharge Debt Solutions. The credit counselors are trained and certified to help you manage your money more efficiently.
When you call or go online for a credit counseling session, the counselors review your expenses (credit card bills, rent, utilities, etc.) and income to help you make a budget. The counselor also will examine your credit report to verify personal information and make sure you are aware of all expenses. They will provide an analysis of those expenditures and what you could do to reduce them.
In many cases, better budgeting and adhering to the suggested spending limits is enough to get you back on track. If the problem requires more than that, the counselor has several options to offer you.
One is a debt management program. Based on the information you supply, counselors work with your creditors to reduce the interest rate on your debt and come up with a monthly payment plan that you can afford. The amount is usually less than you currently pay and requires a 3- to 5-year commitment to eliminate all the debt.
If you don’t qualify for a debt management program, the other options include a debt consolidation loan, debt settlement or even bankruptcy. Make sure you get a good explanation why a counselor recommends one solution versus the others before signing on to it.
Free service isn’t the only reason to select a credit counseling service. There are several obvious and searchable signs to help you find a reputable credit counselor that will create a path to financial security.
Most experts recommend starting with a nonprofit organization. Organizations that are “for profit” have an obvious goal. They want to make money so giving anything away for free (advice, literature, etc.) is usually not part of the process.
Nonprofits tend to be more service-oriented, more patient and less inclined to talk you into something that will cost you money you already don’t have. Their top priority should be helping you find a way to eliminate debt and stay that way.
Approval by the National Foundation of Credit Counseling (NFCC) can dramatically help the agency. The NFCC is the oldest financial counseling organization in the country, its members accredited by an independent third-party organization called the Council on Accreditation (COA).
NFCC members are re-accredited every four years and must maintain extremely high standards for renewal. The NFCC certifies all credit counselors in its member network. Each counselor must complete a training program that guarantees they provide high-quality education and assistance to consumers.
The education aspect of the relationship is critical, especially at InCharge. Counselors will suggest books and websites that help you understand the good side of debt management and the side that sometimes gets financially dangerous. There are monthly emails with tips and reminders of good practices, and you can even manage your account over your smartphone.
The best credit counseling agencies have multiple solution possibilities, depending on each consumer’s specific needs. Help with credit card debt is the #1 reason people turn to credit counseling agencies, but settling with debt collectors, learning how to save for an emergency fund, and paying off car loans and mortgages are other areas they are ready to address.
Most nonprofits offer debt management programs as a solution but provide information other choices such as debt consolidation loans, debt settlement and bankruptcy that might be a better solution for your problem. Each client’s situation is unique amounting to debt they owe and the resources they can draw on to eliminate that debt so tailoring a solution to your particular problem is important.
If you are considering a credit counseling agency, it helps to interview them about how they do business before they interview you about your finances.
Some of the questions you could ask include:
Compare the answers you receive to what you got from other credit counseling agencies. The more forthcoming a company is with the answers to your questions, the more confident you can be in their willingness to see you through the process of eliminating debt.
However, if you are still unsure, consult family and friends to see if any of them have experience with a credit counseling agency or go online to the Better Business Bureau and see how a customer rates the company’s services.
While most credit counseling agencies are committed to helping you eliminate debt and learn how to manage your money, there are some that take advantage of your weak financial position.
If, for example, a credit counselor asks for upfront fees before they are willing to provide services, don’t walk — run! There is a law against upfront fees, and the Consumer Financial Protection Bureau recently has come down hard on companies that violate that law.
Some companies may ask for voluntary contributions for their services, claim affiliation with government or law enforcement agencies when there is none or say they can get you out of debt in just a few months. All of those are bad signs.
The best reason to get credit counseling is financial peace of mind.
If you have to limp from week-to-week because you can’t pay your bills, it creates a lot of anxiety and tension in a household. No one is comfortable when it’s a crisis every time the rent, utilities, or credit card bills are due.
A good credit counseling session should educate you about your financial situation and help you understand the steps necessary to improve it. Counselors can teach you ways to curb spending, increase income and take control of your financial future.
But be aware that resolving debt problems properly takes time. Most counseling agencies have programs that run 3–5 years to remove all debt. It’s not likely you acquired thousands of dollars of debt in a few months so don’t expect to get out of it in a few months.
Also, be sure that you have access to the credit counselor throughout the process. Solutions and advice are easier when the counselor is familiar with your situation. They should provide the personal finance tools you need for a secure financial future.
And always keep in mind the feeling you will have when you get off debt row – financial peace of mind. That’s a goal worth pursuing.
InCharge Debt Solutions offers free credit and debt counseling. You can speak to a counselor by calling the toll free number above or commence online credit counseling. InCharge counselors are certified by the NFCC and experienced in helping consumers identify the root cause of their debt, work out a realistic budget and provide debt relief solutions. For more information on InCharge’s qualifications as well as client success stories, read Why Choose InCharge For Credit Counseling.
NA, ND. Choosing a Credit Counselor. Retrieved from https://www.consumer.ftc.gov/articles/0153-choosing-credit-counselor
Teichert, E. (2013, October 3) CFPB Inks $1.4M Illegal Fees Deal With Payment Processor. Retrieved from http://www.law360.com/articles/477864/cfpb-inks-1-4m-illegal-fees-deal-with-payment-processor