Do you have more high-interest debt than you’re comfortable with? Are you wondering how best to manage it? Are you ready to pay your debt down and get back on track?
There are some potential steps you can take that might help you regain control of your finances and might help you feel more financially stable.
Consulting with a debt counselor could be a step in the right direction, especially if you’re unfamiliar with the different ways you can manage debt.
Are Debt Counselors Only for Consumers in Heavy Debt?
Even if you’re struggling with a small amount of debt, such as a couple credit cards and medical bills, consulting with a professional could be a potential step in the right direction.
Is Debt Counseling a Good Idea?
There is no right or wrong time to visit a debt counselor. Instead, it’s based largely on your personal situation, your confidence in improving your finances and managing debt on your own, and your willingness to get help.
Here are some of the times when credit counseling may possibly be a good idea:
- You’re unsure of how to pay down your debt: The more debt you have the more likely it is that you won’t know what to do next. A debt counselor may be able to create a plan to consolidate your debt – such as with a personal loan – with the hopes of lowering your interest rate, finding a set date that your debt will be paid off and paying off your balance quicker. Sometimes, a professional opinion is all you need in order to take a step in the right direction.
- You’re feeling like you have more mounting bills than you can handle: Whether it’s a couple larger debts or multiple smaller ones that are becoming harder to keep track of, it may be a good time to explore options to consolidate debt.
- You aren’t making much of a dent in your overall debt balance: If you’re only making minimum monthly payments on your credit card or higher-interest debt every month, then you may not see your total debt shrinking in any significant way.
If you’re unsure about the benefits of working with a debt counselor, you could reach out to several professionals in your area. You don’t have to commit to anything. You can simply use these conversations to learn more about the process.
How to Find a Debt Counselor
It’s one thing to decide that you want to consult with a debt counselor. It’s another thing entirely to find a highly qualified and experienced professional that’s right for you.
These are some potential questions you can ask to help find a good match:
- What types of services do you offer? This will give you a clear idea if the debt counselor provides services that suit your financial situation.
- How much experience do you have? It’s important to work with a debt counselor who has helped people in your shoes in the past.
- What are your fees? Not only should you understand the fees, but you also want to get this in writing.
- Are you licensed to provide debt counseling services? Once you have a list of agencies to consider, contact your state Attorney General office to ask about complaints and obtain any other information that’s available.
- Do you have a system in place for keeping information confidential? You’ll share a lot of information with your debt counseling agency, so it’s a must that they have a system in place for keeping it safe and secure. This includes your name, address, phone number, Social Security number, and all financial information.
Watch for Scams
Consumers struggling with debt need to be careful with whom they select to counsel them on their debt. Unfortunately, there are some debt counselling scams out there.
Here are some tips that may help you avoid a scam:
- Verify accreditation, such as with the National Foundation for Credit Counseling
- Ask for references from three (or more) clients
Entering an agreement with a less than reputable organization will lead to additional financial problems, along with more stress in your life.
How Much Does a Debt Counselor Charge?
This varies from one agency to the next, depending on the services you require.
Most agencies charge a set-up fee – typically in the $50 range – as well as an average monthly fee of $35.
Your contract should outline the services you’ll receive, along with information on canceling your agreement when the time comes.
Benefits of Consolidating Debt with a Personal Loan
Your debt counselor may discuss a variety of options with you, one of which may be using a personal loan to consolidate higher-interest debt.
Consolidating all your debt under one fixed rate personal loan can make it easier to manage and pay down, but there are a variety of benefits:
- One set-monthly payment to manage
- Possibly a lower interest rate than your current debts
- A fixed interest rate (Estimate savings using this debt consolidation calculator)
- Variety of repayment terms to choose from, typically ranging from three to seven years, so you can find a repayment term with a monthly payment that fits your budget
- Some lenders have no origination fees or prepayment penalties, like Discover Personal Loans
With the average U.S. household carrying roughly $135,000 in debt, there may come a time when you feel overwhelmed.
If you find yourself struggling to get back on your feet or not sure which direction to go in, it may be time to consult with a debt counselor, or look into consolidating your debt.