Credit Counseling Can Help You Deal with Your Debt

Unbiased Financial Information Provided by Financial Finesse

If you're deep in debt, you may feel like you're all alone. In reality, there are millions of consumers who, despite their best intentions, are in the same boat. Fortunately, there are professional credit counselors who can help you manage your debt and get your finances back on track.

Counselors Offer Help and Hope

Credit counseling is an option for consumers who want to repay their debt (as opposed to filing bankruptcy). The process typically begins with a discussion (in person, by phone, or via mail or the Internet) about your overall financial picture, including how much money you owe and to whom. You will likely discuss how you got into the situation you're in, with the goal of determining how you can avoid the problem in the future. For example, if you got behind on your bill payments because you got laid off, the counselor may encourage you to start building an emergency cash reserve when you're back on your feet.

You'll also go over your options for dealing with your current situation, one of which might be participation in a debt management plan administered by the credit counseling organization. Under a debt management plan, the organization negotiates with your creditors to accept reduced payments, eliminate or reduce finance charges, waive late and over-the-limit fees, and bring your account current. Some creditors do all these things, some do a few of them, and others do none, all depending on their internal policies. You then make one payment to the credit counseling organization each month, which it disburses to your various creditors. (This is not a consolidation loan.)

Different credit counseling organizations have different procedures, guidelines and fees. If you work with an organization that is a member of the nonprofit National Foundation for Credit Counseling (NFCC), counseling is usually free. Participation in a debt management plan may require a nominal set-up fee, but is more commonly limited to an average monthly fee of $14. Why so inexpensive? Because credit counselors don't rely on your fees alone to keep them in business; they receive a large portion of their funding from the creditors they mail payments to each month.