You’ve Already Tried Credit Counseling for Debt—What Next?
One of the most frustrating aspects of debt is how downright alienating it can be. Even though a majority of Americans carry some kind of debt, it’s easy to feel completely alone when you do. And figuring out how to tackle your debt on your own, without resources, is pretty daunting. It can make the journey to becoming debt free seem even longer and more impassable.
Having someone on your side can make all the difference as you try to get a handle on your debt—a trustworthy resource for advice, tips and accountability. Working with a credit counselor can be very helpful in this regard. But there are also people who try credit counseling and realize they’ll need more than financial advice to realistically chip away at their major debts.
If you’ve already tried credit counseling for debt, you’re probably wondering: What’s next?
The Advantages of Credit Counseling
Credit counseling agencies are able to offer consumers a range of helpful services, like:
- Budgeting advice: Credit counselors are available to look over your entire financial situation, from income to spending habits to goals. They can offer practical tips and go over problem areas during your initial session.
- Debt management plan (DMP): A counselor can create a structured DMP for you, consolidating your debts into a single payment and possibly lower the interest rate. The goal here is usually to eliminate debt over the course of three to five years. DMPs usually carry startup fees and monthly fees.
- Counseling for bankruptcy: Debt counselors can provide information to you before you file for bankruptcy, and again before your debts are discharged.
- Counseling for student loans: Your advisor can help you consider your options for repayment and perhaps even communicate with lenders.
- Counseling for housing: Renters and homeowners can speak with a credit counselor about the financial side of housing.
Some credit counseling services are even free, which makes it a great first step for those feeling stuck in their debt.
What If Credit Counseling Isn’t Enough?
But what if you try credit counseling and realize you need something more intensive if you ever hope to get out of debt? What if you’re currently struggling to keep up on even minimum payments, making it unrealistic to expect yourself to stick to the DMP you’d need to repay debt in under five years?
As one financial advisor notes for U.S. News & World Report, a great time to seek out credit counseling would be “before things go sideways.” People already facing serious debt in the thousands should consider a full range of options—although credit counseling is very helpful, it may not be enough on its own to really eliminate debt.
As Freedom Debt Relief points out, some debt strategies, like credit counseling and consolidation, do not reduce the principal amount owed. Whatever amount you go into the process carrying, you’ll still be on the hook for that sum. Other strategies, like settlement, hinge on trying to lower the actual amount you owe through negotiations with creditors. This is one major distinction to consider when you’re researching solutions, depending on the amount you owe and your realistic timeline for repayment.
Debt consolidation involves taking out a loan to pay off a handful of high-interest debts at once, then committing to repaying the loan over time. Settlement hinges on saving up a percentage of what you owe, then reaching out to creditors in an attempt to negotiate down your balances. Both these approaches are potential alternatives/additions to credit counseling for consumers who need hard-hitting solutions.
If you’ve already tried credit counseling, don’t fret. There are still options for debt relief out there, and you may have at least picked up some helpful tips along the way. Keep exploring other options, like consolidation or settlement, and don’t be afraid to circle back to ask your credit counselor about the pros and cons of DMPs.