If you’re feeling stressed due to credit card debt and other types of unsecured debt, you may need professional help to get your finances under control.

Managing a large amount of debt is not easy, but help is available in many forms. Consider seeking debt counseling for a personalized repayment plan and financial education. Read on to learn more about how debt counseling works, the types of services available, the pros and cons, and how to find the best debt counseling agency.

What Is Debt Counseling, and How Does It Work?

Debt counseling offers guidance on money management, consumer credit, budgeting, and debt management. The goal is to help borrowers overburdened by debt avoid bankruptcy or other dire financial situations.

A credit counselor can help you navigate your situation and offer personalized solutions. During the initial consultation, they can review your finances and ask questions to help you make a budget and a debt repayment plan.

They can also enroll you in a debt management plan or provide counseling for managing mortgage debt, student loan debt, and more.

Services Available at Credit Counseling Agencies

For-profit and nonprofit credit counseling agencies can offer several types of services, but they’re mostly known for debt counseling and debt management plans (DMP).

  • Budgeting: Your credit counselor can help you make a budget during the initial counseling session based on your income, debt, expenses, and goals.
  • Debt Counseling: A credit counseling agency can also provide advice on how to manage your money and debts.
  • Debt Management Plans: If needed, your credit counselor can enroll you in a debt management plan. You can enroll unsecured debts in the plan and make a single payment each month to repay the debt over three to five years.
  • Housing Counseling: Credit counseling can also help you explore your options for affordable housing, such as if you’re a first-time buyer or looking for affordable rental units.
  • Student Loan Counseling: Your counselor can also help you explore repayment options if you’re struggling with student loan debt.
  • Bankruptcy Counseling: If you’ve filed for bankruptcy, you’ll need to attend bankruptcy financial education sessions before you file and after your debts are discharged.

How Does Debt Counseling Help?

Debt counseling agencies can provide you with guidance about money management, debt, and budgeting. It can be a great way of getting a low-cost, reliable financial advisor from a professional, especially if you’re looking for low-income debt relief.

Trained and certified credit counselors can also help create a personalized plan to resolve your debt problems. If you have too much debt, it can be a good way to explore your options and enroll in a debt management program to make repayment easier.

“Debt counseling is a great way to get expert help evaluating your finances and expenses to determine what kind of assistance you need,” says Teresa Dodson, a debt expert and the founder of Greenbacks Consulting. “The programs help you understand your ‘real’ situation and your options so you can make the best decision,” Dodson adds.

Examples of How Credit Counselors Can Help

Let’s consider an example to understand better how a credit counselor can help. If you have a lot of credit card debt, a credit counselor will first review your finances and make a budget to determine how much you can afford to pay toward your debt each month.

Your credit counselor can then enroll your debts in a debt management plan with an affordable monthly payment. They may also be able to get fees waived and lower interest charges. Under this new plan, you can make a single payment each month to the credit counseling organization to become debt-free in three to five years.

Here’s an overview of how credit counselors help:

  • Guidance on debt and money management
  • Help create a budget
  • Personal finance education and resources
  • Help enroll in a debt management plan

Is Debt Counseling Right for You?

Whether debt counseling is right for you will depend on the type of debt you have, how much you owe, and your personal situation. Consider these pros and cons before you decide to seek counseling.

Pros

  • Debt counselors can provide financial education and resources to improve your well-being.
  • Counselors can help create a budget and provide you with tools to make better financial decisions.
  • They can help you create a plan to get out of debt faster.
  • Your monthly payments can be affordable if you enroll in a debt management plan.
  • Debt counseling can also help you deal with other debts, like student loans and mortgages, so you can repay them on time and avoid a short sale or foreclosure.

Cons

  • You may have to close all credit accounts enrolled in a debt management plan and won’t be able to take on additional debt.
  • A debt management plan will be visible on your credit report, which may make it difficult to qualify for new credit.
  • You may not be able to save as much money as other debt relief programs, such as debt settlement.

What To Expect From a Debt Counseling Session

Depending on your situation and needs, your first debt counseling session may include:

  • Tips on how to improve your financial situation
  • Budgeting help
  • Credit report review
  • Tools and resources to help

Based on your situation, your credit counselor may also suggest you enroll in a debt management plan that reduces your interest rates so you can get out of debt with a fixed payment schedule.

There may be follow-up sessions if you need additional assistance and to monitor your progress.

How To Select a Debt Counseling Company

We recommend carefully reviewing your options when it comes to debt counseling companies because there are many options available. Compare prices, reputation, certification, and ease of access to find the best counseling and debt management company.

Here are a few tips to consider:

  • Ensure the agency has the appropriate certifications and accreditations. Most credit counseling agencies are members of the Financial Counseling Association of America or the National Foundation for Credit Counseling.
  • Fees vary based on the services you need, location, and the agency. Check to see how much you’ll pay before you enroll.
  • Check online reviews to ensure the agency has a good track record of customer satisfaction.
  • You may be able to receive services in person, online, or over the phone. Check availability in your location.

How To Find a Credit Counselor

If you’re looking for a credit counselor, start your search with the list of approved credit counselors in each state through the U.S. Department of Justice.

You can also find credit counselors through the National Foundation for Credit Counseling or the Financial Counseling Association of America. Regardless of the credit counselor you choose, it's important to ensure there aren’t any complaints against them at your state consumer protection agency or state attorney general.

How Much Does Debt Counseling Cost?

The initial consultation is usually free at most nonprofit counseling organizations. However, if you enroll in a debt management program, you’ll have to pay a set-up and monthly fee. Costs vary based on agency and location, but you’ll usually pay up to a $35 monthly fee and up to $74 for the initial set-up.

Get the Most Out of Your Debt Counseling Session

Debt counseling can help you in a number of ways, whether you need support getting out of debt or budgeting to repay debts on your own.

We recommend preparing in advance before you seek credit counseling services by gathering your documents and information related to your debts. This will ensure that the counselor has all your information on hand to provide advice.