Debt and credit

What Can Credit Counseling Agencies Offer People in Debt?

Many people don’t know what services are even available to them when they work with a credit counselor. With the high number of people struggling with debt, credit counseling fills a great need. These are typically non-profit organizations that work with consumers to help them understand their debt and formulate a plan for getting out of it.

It’s important to note that true credit counseling services don’t ask for payment up front. So be wary of an organization that labels itself as credit counseling that won’t give you any resources without payment.

These are a few of the top services you can receive through credit counseling:

  • Budgeting assistance: Creating a budget may seem like an overly simple approach to getting out of debt. However, the simplest things are sometimes the most effective. Creating a budget gives you a crystal-clear picture of where your money is going every month. Without one, it’s possible you’re letting more than you know slip through the cracks. A credit counselor can walk you through what you need to know about budgeting. It’s once again important to note that legitimate credit counselors won’t charge you for this type of service.
  • Help reviewing your credit report: Your credit report is the recent history of your relationship with debt. This is the file lenders use to determine whether you’re eligible for a loan, and to set the terms of your debt. Credit counselors can give you some helpful advice about what’s in your credit report and provide tips for how to improve your score.
  • Explaining your next options: For some people, credit counseling might be enough in order to get them on track to paying off their debt. But this isn’t going to be the case with everyone. Many consumers are going to need to enlist further help beyond the credit counselor. For people in this situation, the next step could be debt relief with an organization like Freedom Debt Relief or a debt management plan through the counseling agency.

Debt Relief Strategies After Credit Counseling

Although credit counseling itself is often a free service, debt settlement and debt management generally require paying fees to participate. While no one in debt wants to pay even more in order to get out of debt, sometimes it’s worthwhile. There are a few main approaches used by organizations when helping people to get out of debt in this way:

  • Debt Settlement: When you use a debt settlement strategy, you’re working with a debt relief company to renegotiate terms with your lenders. Essentially, they’re going to offer your creditors a lesser amount than the original balances. There’s no guarantee your lenders are going to agree to this, but they may if the alternative is getting no payment. When it works, debt settlement can significantly reduce the amount you owe to each lender — then you pay a fee to the program per debt settled.
  • Debt Management: You may be eligible for a debt management plan (DMP) through a credit counseling agency. This means you’ll make a single monthly payment to the agency, which will then distribute it to your creditors. Creditors may be willing to reduce your interest rates or knock off some late fees if they see you’re in a DMP. The fee you pay for this service can vary, but many agencies charge a monthly fee.

Credit counseling is an important first step for many people trying to get out of debt. However, it’s often not enough on its own. Understand when you need to take advantage of some of the further services in order to eliminate your debt.

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