Credit counseling involves meeting on-on-one with a certified credit counselor employed by a non-profit consumer credit counseling agency, and can be extremely beneficial if you are struggling with or overwhelmed by debt. Part of a credit counselor’s job is to help you evaluate your specific financial situation, and to offer personalized guidance on budgeting, credit, and debt repayment options. Some potential benefits of debt repayment through a credit counseling agency can include rebuilding your credit, reducing interest costs and monthly payment amounts, and having a concrete action plan to follow to work toward achieving your financial goals.
Credit counseling can be a great option if you:
- Are struggling with monthly minimum payments for multiple unsecured accounts, and a reduced payment amount can be afforded within your budget
- Have high interest rates and your creditors will not work with you directly to reduce them
- Want to resolve your debt issues in a limited and fairly short term timeframe (5 years or less)
- Are looking to understand how to better manage your finances
- Need some additional guidance toward taking the best steps to achieve your financial goals
- Are considering bankruptcy but want to discuss alternative options first
Debt repayment through credit counseling may NOT be the best option for you if:
- Most of your debt is secured or otherwise ineligible – ex. student loans, mortgages, auto loans, home equity loans/lines of credit, etc.
- Your debt amount is relatively small and can be paid off directly in a short period of time
- You have the ability to make larger than minimum monthly payments
- You still cannot afford household and living expenses even with a lower monthly debt payment
Whether or not you choose to repay your debt through a repayment plan with a consumer credit counseling agency, meeting with a credit counselor is a great recommendation for anyone struggling with debt, because an expert can take a look at the entire financial situation and help come up with an action plan on how to move forward. Many credit counseling services, including initial consultations, are free, so there is no harm in at least hearing what a certified credit expert may recommend. Do your research, and remember that there are no quick fixes or shortcuts when it comes to your finances. It’s a process, but one that can really be worth it!