If you’re carrying a load of debt — maybe staggering under its weight — you are not alone.
The average U.S. household with credit card debt has an outstanding balance of $15,654, according to a 2017 NerdWallet survey conducted by Harris Poll. The average household with any kind of debt, including mortgages, owes $131,431.
Debt — especially credit card debt — is expensive, and it’s only becoming more costly as interest rates climb. So, 2018 is an excellent time to bring down your debt.
If you plan to go it alone, check out “8 Foolproof Steps to Get You Out of Debt Fast.” But if you need help, know that trustworthy credit counseling agencies specialize in helping consumers tackle their debts.
These agencies offer help with paying off debts and establishing and maintaining good credit. This may involve creating what’s known as a debt management plan — a personalized plan for paying off all your debts via one monthly payment.
Through a debt management plan, you may be able to have fees waived and interest rates reduced.
When shopping for help managing your debts, here’s what to look for:
1. Nonprofit status
It’s easy to stumble into the hands of a bad “adviser” — including debt-settlement companies that may leave their clients worse off.
To be safe, get financial counseling from a nonprofit agency. Here are several resources for finding a legitimate one:
- Money Talks News’ Solutions Center: Find a reputable expert to help you with credit card debt, student loan debt, tax debt and more. These are partners Money Talks News has hand-picked to help readers.
- National Foundation for Credit Counseling (NFCC): The NFCC’s agency locator can point you to nonprofit agencies near you that provide financial reviews, counseling and similar services.
- Other sources of help: The Federal Trade Commission (FTC) says, “Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs.”
2. Free information
You should be able to learn all the details you need about an agency and its debt management plans for free. Don’t surrender your personal details to get information about a company or its fees.
3. Straight talk about fees
Don’t trust a company that gives you the runaround when you inquire about the cost of its services.
4. Free or low-cost counseling
Many nonprofit credit counseling services provide free advice about credit, debt and budgeting.
Fees for services like a debt management plan should be reasonable, according to the NFCC. For set-up fees, that generally means $50 or less. For monthly fees, that means around $25.
5. Free help for serious hardships
Agencies should waive fees if you have a serious financial hardship.
“If an organization won’t help you because you can’t afford to pay, go somewhere else for help,” the FTC advises.
6. A thorough interview
An agency should take the time to get the details of your financial picture, including income and debts.
Be prepared to bring copies of bills and credit card and bank statements. Some clients bring along bags of bills and statements they’ve been afraid to open.
7. A complete plan
If you sign up for a debt management plan, make sure it includes all of your debts, not just some. Also, be certain that you’ll be able to receive regular reports on your accounts.
8. Various services
Stay away from businesses that only offer debt services. Trustworthy agencies offer various types of help. In addition to debt management plans, they may include:
- Budget counseling, to help with managing money
- Credit and debt counseling, to explain and help improve your credit score, dispute credit report errors, and analyze and prioritize debt payments
- Other services, including counseling for bankruptcy, student loans, housing and getting a mortgage or reverse mortgage
Trustworthy nonprofits typically offer free public classes and workshops on financial subjects.
“The absence of any true education offered to the general public is a red flag,” says the NFCC.
Back away if you feel pressured or hear unrealistic promises. Be suspicious of “counselors” who push products, come on like salespeople or offer a one-size-fits-all solution.
11. No debt reduction claims
Credit counselors can negotiate with your creditors to reduce your debt payments, such as by lowering your interest rate or spreading payments over a longer time. But they can’t reduce the total amount of debt you owe.
So, avoid companies offering “debt reduction” plans or otherwise promising to reduce your total debt.
12. No minimum debt requirement
You should be able to get help from a legitimate company whether your debts are large or small. If a company says it requires a minimum amount of debt to help you, you’re in the wrong place.
What is your strategy for debt in 2018? Comment below or on our Facebook page.