If you’re carrying a load of debt — maybe staggering under its weight — you are not alone. U.S. households hold, on average, credit card balances totaling $16,061, according to the annual survey of household debt by Nerdwallet. For some, the big burden is student loan debt or tax debt. The average household with any kind of debt owes $132,529, including mortgages, Nerdwallet said.
Debt — especially credit card debt — is expensive, and it’s only becoming more so as interest rates climb.
In short, 2017 is an excellent time to get some help and bring your debt down to manageable levels.
Fortunately, there are many excellent, trustworthy credit counseling agencies able to help. Unfortunately, it’s too easy to stumble into the hands of a bad “adviser” — including debt-settlement companies that may leave their clients in worse shape than they were. So, as you resolve to tackle your debt, follow these tips:
To be safe, get financial counseling from a nonprofit agency. Here’s where to find one:
- Money Talks New Solutions Center: Find a reputable expert to help you with credit card debt, student loan debt, tax debt, and more. These are partners we’ve hand-picked to help our readers.
- The National Foundation for Credit Counseling: The NFCC agency locator shows local, regional or national organizations operating near you that provide credit, debt and budget counseling in person, online or by phone. You can get started by submitting information online.
- The Association of Independent Consumer Credit Counseling Agencies represents independent nonprofit agencies providing credit counseling and debt help to consumers. Find a member agency here.
- Other sources of help: The Federal Trade Commission says:
Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.
What to expect
Trustworthy credit counseling agencies offer help with reducing debt and establishing and maintaining good credit. They can help you set up a budget. With their debt management plans, you may be able to have fees waived and interest rates and monthly payments reduced. But they can’t reduce the balance (the total amount) of debt you owe.
ClearPoint Credit Counseling Solutions, a NFCC network member, explains a debt management plan:
It’s a systematic, step-by-step, personalized plan for paying off 100 percent of your debt. Participants make a single monthly payment to a consumer credit counseling service such as ClearPoint, and the agency distributes the funds to their creditors.
Get a plan in place to chipping away the debt — that would be an accomplishment in itself — but the duration of that plan will depend on your obligations. For many people it takes three to five years to pay them off.
Credit counselors can negotiate with your creditors to reduce your payments by lowering your interest rate or spreading payments over a longer time. But be wary of companies promising to reduce the amount of debt you owe. The CFPB says to distrust debt settlement companies that:
… typically offer to pay off your debts with lump sum payments that are less than the full amounts you owe. For example, for every $100 of a loan that a creditor agrees to forgive, the debt settlement company will charge you some portion in fees.
If you sign up for a debt management plan, make sure it includes all of your debts, not just some. And be certain that you’ll be able to receive regular reports on your accounts. The NFCC explains in detail how to assess debt management plans and credit counselors.
When shopping for help managing your debts, here’s what to look for:
1. Free or low-cost counseling
Many nonprofit credit counseling services provide free advice about credit, debt and budgeting.
And when it comes to getting help with a debt management plan, USA.Gov says there’s no reason for an agency to charge consumers high fees: “The cost of setting up this debt management plan is paid by the creditor, not you.”
For example, for a debt management plan, GreenPath Debt Solutions, an NFCC member, charges a one-time setup fee of zero to $50 and a monthly fee averaging $36.
2. Straight talk about fees
Don’t trust a company that gives you the runaround when you inquire about the cost of its services.
3. 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.
4. 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,” advises USA.gov.
5. A variety of services
Stay away from businesses that only offer debt services, and avoid companies offering “debt reduction” plans. Trustworthy agencies offer a variety of types of help, including:
- 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.
- Debt management plans, in which you make a single payment to the agency, which pays your creditors and helps you get debts under control and paid off.
- Nonprofits also may offer bankruptcy help, student loan counseling, housing counseling, and counseling on 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’re feeling pressure or hear unrealistic promises. Be suspicious of “counselors” who push products, come on like salespeople or offer a one-size-fits-all solution.
8. A thorough interview
An agency should take an hour or more 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.
9. No minimum debt size
You should be able to get help 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.
10. No black marks
Check out counseling agencies you are considering:
- Learn if your state attorney general has received complaints about an agency. Find your state AG’s contact information by clicking your state on the map at the bottom of this page.
- Locate additional consumer protection resources in your state here, at USA.gov.
What is your strategy for debt in 2017? Post a comment below or on our Facebook page.