Resolutions 2013: How to Find Financial Help


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It's a common resolution: destroy debt. But it's tough to embark on a debt-destroying mission when your debt is already destroying you. If you need help, make this the year you get it: Call a credit counselor. Here's how to find the right one.

If you’ve made a New Year’s resolution to get into better financial shape this year, you’re not alone. In fact, spending less and saving more are among the top resolutions, ranking even higher than spending more time with loved ones, according to the University of Scranton’s Journal of Clinical Psychology.

But sometimes it’s not enough to simply resolve to build a better budget or pay off high credit card balances. Sometimes things are so far gone they require outside help.

If you’re overweight and don’t understand how to properly exercise, you might enlist the services of a personal trainer. If you’re overburdened by debt, you should turn to a nonprofit credit counselor for help.

Fortunately, finding help with things like budgeting and debt is a lot cheaper than hiring a personal trainer. In the video below, Money Talks News founder Stacy Johnson offers insight. Check it out, then read on…

How to find help

If you’ve got a debt problem, the right credit counselor can help. Many offer their services via local offices, online, or over the phone. However, as with many fields, this one has its share of bad apples. Here’s how to pick the right counselor:

1. Check credit counseling associations

When searching for a credit counselor, a good rule of thumb is to start with members of the industry’s two major trade groups, the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.

Members of these associations agree to follow fair business practices, take continuing education, and employ only accredited counselors, among other things.

The U.S. Department of Justice also keeps a list of approved credit counseling agencies as required under the federal bankruptcy code. But just because an agency appears on the federal list doesn’t mean you should skip your due diligence.

2. Look for complaints

Never deal with any credit counseling organization without this step. Check the Better Business Bureau and your state’s attorney general’s office for consumer complaints, as well as online complaint sites.

3. Understand how these agencies work

While a credit counselor should be happy to provide free advice, if you’re problem is severe, they typically help by putting you on a Debt Management Program, also known as a DMP. When you participate in a DMP, the agency is essentially getting between you and the people you owe, most often credit card companies. They contact your creditors and attempt to negotiate lower interest rates, get penalty fees waived, and arrive at a monthly payment you can afford. Then you send one check to the counseling agency monthly, and they divide it among your creditors.

Understand that it’s not a quick fix: A typical DMP lasts three to five years. And during that time, you’ll not be allowed to have credit cards.

If you end up in a DMP, you’ll typically pay a small monthly fee to get it set up ($0-$50) and monthly fees (5-10 percent of your debt payment, but normally capped at $25-$50).

4. Ask lots of questions

Wherever you go, ask questions before you agree to anything. For example, ask the counselor about the number of clients they have on debt management programs. If the answer is nearly all, that’s bad. If the answer is about half, that’s good, because it shows they’re trying to help with other methods.

Ask about the specific help you’re going to get, because if you’re not going to get any tools to help change the way you deal with debt, you could end up in the same place farther down the road.

Ask if their counselors have any training, and if they do, whether they have any certification. Ask if the agency is accredited by an independent organization. Ask what their help will mean to your credit history. (The correct answer is, “There’s no way to tell for sure. Could even be negative. But consider the alternative.” The wrong answer is, “No problem, buddy! Sign here!”)

And talk to more than one agency. When you talk to several, it’s easy to distinguish between the ones that come across like used-car salesmen vs. ones that sound like what you’re really looking for: an objective counselor.

5. Ask about fees

As with anyone you turn to for help, always ask what it’s going to cost. As I said above, quality nonprofit credit counselors should always provide free advice and low-cost assistance if something like a DMP is required. If you get quoted more than a nominal amount, you’re in the wrong place.

Before agreeing to anything, get everything in writing.

Bottom line? If you can’t see your way out of a debt disaster, definitely get help. And don’t be ashamed or embarrassed to do so. More than a million people every year file personal bankruptcy. Millions more do nothing to try to help themselves and end up with ruined credit and lots of sleepless nights. Going to a pro for help may not be your proudest moment, but there are definitely a lot worse things that could happen.

Stacy Johnson

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