2-Minute Money Manager: Should I Use a Credit Counselor for Debt Help?

Piggy Bank Drowning
Photo by iRomolo Tavan / Shutterstock.com

Welcome to your “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is one I’ve gotten dozens of times. It’s about whether there’s any way to find free help with debts. The answer is yes, but you must be careful when you pick a credit counselor.

Watch the following video to learn how to do it right. Or, if you prefer, scroll down to read the full transcript and find out what I said. You also can learn how to send in a question of your own below.

For more information on this topic, check out “9 Tips for Finding Good, Cheap Debt Help” and “Ask Stacy: I’m Drowning in Debt. What Can I Do?” You can also go to the search at the top of this page, put in the words “debt help” and find plenty of information on just about everything relating to this topic.

Finally, if you need debt help now, visit this page of our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, everyone, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this question is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Today’s question comes from Bert:

Can you discuss credit counseling companies? The third parties that work with your creditors? Do they do anything I couldn’t do myself? Are these third parties likely to get better terms for me to pay back creditors than I could get myself? Will they work to help consolidate payday loans?

Let’s answer these questions one at a time. First, let’s define what a credit counselor is.

There are organizations out there — most of which are nonprofits — that will stand between you and your creditors and help you get out of debt. They may put you on what’s called a debt management program, or DMP. That means you’ll be sending them a check every month and they’ll be dividing that check among your various creditors. They also may try to negotiate lower rates, maybe get some fees waived and do other things that might help you pay off that debt as soon as possible.

Debt management programs have their drawbacks. For example, they typically insist you don’t use credit cards while in the program. It also takes time. The average length of a debt management program is around four years.

Still, I’ve known many people who have used this method to destroy their debts. So, it can be a great thing to do. A debt management program certainly beats the heck out of staring at the ceiling at night wondering how your bills are going to get paid. It also beats the constant calls from creditors demanding money. So, I’m a big believer in credit counseling.

Now, let’s go back and take another look at Bert’s questions. “Do they do anything I couldn’t do myself?” Theoretically, Bert, they don’t. There’s no law that prevents you from calling up your creditors and trying to do some sort of repayment program. However, nonprofit credit counselors normally charge nothing to talk to you and very little if they put you on a debt management program. In fact, if you can’t afford it, they won’t even charge you at all.

If it doesn’t cost anything and you can avail yourself of the resources brought to the table by professional credit counselors, I’d suggest you do so.

I’ve been on the board of directors for two different credit counseling agencies over the years and understand how these companies work. In fact, one of my first news stories back in 1991 was about credit counseling. I know a lot about this business and I’m telling you, get the right agency and you’ll be doing yourself a favor.

Let’s answer the next question. “Are these third parties likely to get better terms than I can get myself?” They probably will. They’ll certainly do it with a lot less effort on your part.

The final question: “Will they work to help consolidate payday loans?” While they tend to specialize in credit card debt, a quality credit counselor should be able to help you with almost any kind of debt.

Counselors specialize in credit cards because credit card debt is so common, and they have relationships with many banks, which makes getting concessions automatic in many cases. It may be more difficult for them to get the same breaks when it comes to payday lenders, but they should still be able to help.

I hope that answers your questions, Bert.

One more thing to know: There are a million credit counselors out there. Be careful about just picking up the phone and calling anyone at random, because some of these people are not on the up and up. It’s an industry that’s really rife with rip-offs.

We have a relationship with a reputable credit counseling agency. You can go to MoneyTalksNews.com, go to our Solutions Center, then click on Debt Help and we’ll hook you up.

You can also go to the NFCC, the National Foundation for Credit Counseling. They have a locator that can help you find quality counseling. The NFCC has been around for a very long time, and you can trust their recommendations.

Have a profitable day and meet me right here next time!

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

Got more money questions? Browse lots more Ask Stacy answers here.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
17 Surprising Things You Can Clean in a Dishwasher
17 Surprising Things You Can Clean in a Dishwasher

It’s often easier and faster to put these household items in the dishwasher than to clean them by hand.

12 Ways Retirees Can Earn Passive Income
12 Ways Retirees Can Earn Passive Income

These simple ways of earning income without a lot of active, ongoing effort can stretch your retirement dollars.

15 Great Amazon Finds You Can Buy for Less Than $5
15 Great Amazon Finds You Can Buy for Less Than $5

These products offer big value at a small price.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

7 Mistakes Guaranteed to Ruin Your Retirement
7 Mistakes Guaranteed to Ruin Your Retirement

Make even one of these money mistakes, and you’ll probably end up eating ramen noodles in your golden years.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

Prices Are Soaring on These 7 Items
Prices Are Soaring on These 7 Items

Some surprise price jumps are making life more difficult for consumers.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

This iconic dinnerware is prized for everyday use as well as reselling for profit.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

Beware This Hidden Ingredient in Rotisserie Chicken
Beware This Hidden Ingredient in Rotisserie Chicken

Something foul may lurk in those delicious, ready-to-eat birds.

7 Home Improvements That Cost a Lot More in 2021
7 Home Improvements That Cost a Lot More in 2021

These projects will take a bigger bite out of your budget than in the recent past.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

7 Big Purchases You Should Never Make
7 Big Purchases You Should Never Make

Sometimes a big-ticket purchase is nothing more than a big waste of money.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.