Paying off debts has been a problem since… well, it was probably an issue even before money was created! And it’s clearly still a big problem in our world today, especially as the U.S. still struggles to regain its strength after the recession of the early 2000s. It doesn’t matter whether you lost all your savings because of the market collapse, or whether you never even had savings to begin with; whether you’re 60 years old and struggling to pay off the same loans you’ve been paying for years, or whether you’ve just graduated from college and suddenly have thousands and thousands of dollars in student loans to start paying off -- it doesn’t matter who you are or where you’ve been, debt can overwhelm anyone.
And this is where doubt counseling comes into play. There are a variety of different services and agencies who all offer financial expertise, but provide slightly different angles for debt management and/or debt reduction. It can be difficult to figure out which type of service will be best for your situation, but here’s just a short list of what to look for when you’re seeking a financial adviser:
- Credit Counseling This type of counseling is usually offered by a nonprofit organization, and the counselors you’ll find here tend to focus on debt related to credit cards. Actually, many of these organizations are fully- or partly-funded by credit card companies -- and yes, we know that sounds a little fishy, but it’s actually a good thing! Because the credit card companies are invested in these agencies, they want the agencies and the counselors to succeed; the only way that the counselors will succeed, of course, is if they’re able to help clients manage and reduce debts. Credit counseling services may also be for-profit, but these tend to be less beneficial for consumers because they charge higher fees, and because they aren’t in the public eye quite so much -- allowing for some questionable practices to go unnoticed (including not providing the debt relief originally promised).
- Debt Management Plans These plans are often offered in conjunction with other credit counseling services, and they’re intended to be short-term solutions for debt management. These plans will lower your monthly interest rates on unsecured loans, which can be beneficial in the long-run, because even the smallest decrease in an interest rate can make a huge difference in your minimum payments. Because this type of agreement can get a little tricky, it’s best to consult with a financial adviser before making any big changes to your loan agreements.
- Financial Counseling Financial counseling services are a bit different from the two services listed above, because they don’t just make a plan for getting rid of one debt you currently have. Instead, financial counselors will take a holistic approach to your debts and will consider your entire financial situation before creating a plan for you. You’ll receive money-saving tips, and the adviser will evaluate your income and spending habits in order to lay out a credit card payment plan that you’ll actually be able to accomplish. Many debtors are hesitant to see these advisers, because the first few steps can be a little painful; we certainly won’t tell you that it’ll be fun to see all of your expenses laid out in front of you. Nevertheless, these advisers do produce results for their clients.
- Debt Settlement Counseling If you’re specifically having problems managing multiple unsecured debts, then debt settlement counselors may be able to help. These counselors will negotiate with your creditors to reduce the balances of certain debts you currently have; not all debts qualify for this type of settlement, but debts stemming from medical procedures and credit cards can often be lowered. Although these settlements may be able to save up to 40% on outstanding debt payments, it’s worth noting that settlements provide immediate relief rather than long-term solutions. Your credit score is likely to decrease with this type of settlement, and you may have trouble getting low-interest loans in the future.
Keep in mind that there are plenty of other counseling services available, and that no matter what counseling you choose to look into, the important thing is that you want to reduce and manage your debt. Your financial situation is completely unique to you, so you shouldn’t feel any pressure to receive counseling or to follow a budget plan that just isn’t working. The right financial adviser will do everything possible to get you out of debt now, and help you manage your money on your own so that you don’t have to deal with debt in the future.