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Credit Counseling vs. Debt Management

Debt and credit

When you are trying to reduce your debt and to stop collectors from calling you all the time, the number of options for getting help can seem overwhelming. Some companies claim to offer debt settlement, others will offer to help you with debt management. You can also seek help from a credit counselor, who may also provide a debt management plan. When it comes to credit counseling vs. debt management, the major difference is who the programs are for and what they aim to do.

Credit Counseling

If you are having any sort of financial trouble, whether you’re deep in debt or are simply struggling to make ends meet each month, credit counseling can be helpful. Counseling programs, such as those offered by CESI, usually operate on a nonprofit basis, meaning the counselors you speak with aren’t out to make money off of your financial problems. Credit counseling isn’t only for people who have a considerable amount of debt. You might find it helpful to speak with a counselor so that you can avoid going into debt or so that you figure out a way to balance what you earn with what you spend. Counseling is usually done on a one-on-one basis and a counselor will develop a customized, personal plan to help you get control of your financial life.

Debt Management

In terms of credit counseling vs. debt management, a debt management plan can be the next step after a person has gone through counseling. But, the two don’t have to go together, meaning that a person can receive counseling without ultimately enrolling in a debt management plan.

While counseling can help the majority of people who have financial troubles, debt management isn’t a one-size-fits-all solution or the right pick for everyone. Usually, a counselor will recommend a debt management plan to people who have trouble paying their debts monthly or who have too much debt, according to the FDIC. If a counselor recommends that you enroll in a plan, it will usually involve you and the counselor working with your creditors to come up with a monthly payment that you can afford. Typically, lenders will waive fees and reduce interest rates for people in such plans. Once you are on a debt management plan, you make a single payment monthly to your counselor. The counselor then divvies up amount, paying each of your creditors separately.

How to Pick One

Starting with credit counseling is usually a good idea, as the counselor can help you come up with a budget and can make recommendations to you to help you manage your finances more effectively. A counselor can also recommend debt management to you, if needed. When picking a counselor, you want to choose a reputable company that will be working for you and whose goal is to make sure your best interests are served. Look for counselors with training and certification. Check out the company’s mission to make sure it is dedicated to helping you.

Rebuilding your finances and credit does take time, so it’s a good idea to be wary of any companies that promise a quick fix or companies that rush you into a program without fully reviewing your financial situation first. Credit counseling, and if needed, debt management, can help you put the pieces of your financial life back together, but the process can be slow and steady.

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1 Response to Credit Counseling vs. Debt Management

  1. Ellie Davis says:

    Thank you for suggesting that starting with credit counseling is normally a good idea. My husband and I are really struggling with finances and we are wanting to get some help. I’ll have to look into financial planners that can provide us with some dept counseling in my area.

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