Free Credit Counseling: What It Is And Why You Might Need It

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Free credit counseling

Are you struggling with debt and building credit? When you’re struggling to fight debt, maintaining healthy credit can be a struggle. But there are many free credit counseling resources that can help you.

Financial services can come at a high cost. But not all of your options will cost you an arm and a leg. So, let’s go over your best free options for credit counseling.

Credit Counseling Agencies

Most credit counseling agencies will offer free initial assessments. But those can be misleading, as they’ll normally try to push you into a paid plan. While many of those plans might be good options, they aren’t free and can add to your financial challenges when you’re already suffering.

If you want free credit counseling, you need to go to the agencies that explicitly say they are free. Most of those agencies are non-profits.

Free credit counseling is available from a few older and more experienced non-profits. These agencies are quite busy now due to the COVID-19 virus, which has left millions unemployed. But they will still give you the opportunity to connect with a credit counselor.

What Do Credit Counselors Offer?

Professional credit counselors can offer advice and if necessary, connect you with financial services. The advising portion will always be free with the non-profits that offer free counseling.

Free credit counseling will first involve a professional adviser assessing your finances. They will then offer you tips that enable you to make the most of the money you have available. The goal is to reduce the overall burden of your debt while allowing you to take your money as far as possible in your daily spending. 

Debt Management Plans

Non-profit debt management plans are usually the first option you will be offered. These plans will be suggested when you’re having trouble keeping up with your credit card payments and have worsening debt.

Debt management plans are comprehensive plans you must follow to shake off your debt. They will involve you allowing the agency to handle your money and use it to strategically fight debt. This typically involves:

  • Rolling your debts into one single debt to be paid back monthly
  • Negotiating lower interest rates with your creditors
  • Strategically attempting to improve your credit score
  • Stopping creditor calls
  • Handling legal/tax concerns for you
  • Providing financial education resources

Lowering your interest rates won’t be a lender’s first action. But if a credit counselor can convince them to, it will make things better for both you and the lender. Lenders would rather receive a smaller portion of your debt than no portion of it due to personal bankruptcy.

Bankruptcy Counseling

Bankruptcy is a nuclear option. You can declare Chapter 7 bankruptcy with the help of a free credit counseling service.

Declaring bankruptcy will destroy your credit score for the next ten years. But it will clear you of your debts for the time being. Chapter 7 liquidation is the most common form of personal bankruptcy in the US. The bankruptcy process takes about four months. But it’s an option that can clear you of most of your debts. Just be aware that it won’t clear you of student loan debt.

Counseling Programs

A typical coaching program will take a few steps. First, your coach will look over your finances. They will then:

  1. Give free credit advice
  2. Go over your debt management options
  3. Explain your available support resources and go over potential referrals
  4. Give you an actionable plan to follow
  5. Offer ongoing support if necessary

Choosing A Free Credit Counseling Service

According to the FTC, there are a few things you should look for when choosing an agency.

Free Resources

An agency that charges you money for educational resources alone should be avoided. Legitimate non-profits can help you access a wide selection of free literature that can help you fight off your debt.

Formal Contracts

Free credit counseling agencies and the services they refer you to will likely have contracts. Read any formal contract presented to you carefully. Make sure any verbal promises made to you are confirmed in writing in your contract.

Accreditation

Who accredits your free credit counselors? Always go with a counselor that is accredited with a non-affiliated third party. Make sure you do the same background research regarding the organization’s licensing.

Why You Should Consider Free Credit Counseling

When you work with the right non-profit agency, there are no downsides to free credit counseling. At the very least, you will be given good advice that you can act upon. Also, you may receive:

  • Debt management plans
  • Budgeting advice
  • Bankruptcy counseling
  • Student loan counseling
  • Referrals to relevant financial services
  • Help to find affordable housing and food
  • Credit score improvement advice

If you’re struggling with debt in these difficult times, it’s important to take advantage of the best resources available. Look into your free credit counseling options today.

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