Money is a top stressor for adults in the United States today. With overdue credit card debt at the highest level in decades added to student loan payments and mortgage debt, many Americans are struggling to get out of debt. And they don’t know where to turn to get trustworthy debt help.
Determining how to pay off debt can be a challenge, though. Some can read a book and translate principles into their own financial lives. But others need help choosing the best debt relief method, setting a realistic budget and staying on course.
Debt relief comes in many different packages, and some methods are much better for consumers than others. So, how do you know who to trust and what method is actually best for your situation?
For more than 30 years, the Financial Counseling Association of America (FCAA) has helped consumers connect with trustworthy, credentialed non-profit credit counseling organizations. In this article, we share tips to find trustworthy debt help, how to avoid risky debt settlement plans, and stories of how people successfully got out of debt.
How to find trustworthy debt help
Discussing your finances can feel uncomfortable, especially when you have fallen into debt. When you realize you need help and cannot meet your minimum payments, where do you turn?
Most people head online to research their options. There they find the four main types of debt relief: debt management, debt consolidation, debt settlement and bankruptcy. The best option depends on your unique situation, but the riskiest option can be engaging with a for-profit debt settlement company.
The marketing materials for the different types of debt relief can make it hard to know which option best fits your particular needs.
Wouldn’t it be nice if someone could objectively review your financial situation and give you expert advice on what to do? Someone who doesn’t benefit from the choice you make, so you can trust what they say?
Non-profit credit counseling organizations do just that. A credit counseling agency is a non-profit organization with an educational mission to advise people on money and debts. They help people look at their financial situation, develop a budget, learn about money management and create a debt management plan (if appropriate for the consumer).
These tips will help you know whether you can trust the organization you decide to call for trustworthy debt help.
Look at their mission
Mission matters. Is the organization you call focused on education and helping people get out of debt or do they have conflicting priorities?
“A non-profit credit counseling organization is going to have a whole different take than a for-profit debt settlement company,” said Lori Pollack, Executive Director of FCAA.
“Credit counseling agencies are education-based at their core. When a consumer calls, a non-profit counselor isn’t thinking, ‘How do I monetize this?’ They are focused on what is best for the consumer. They take a big-picture, human approach to reviewing each person’s financial situation. That’s really important.”
April Lewis-Parks, Director of Education for Consolidated Credit, agreed and added, “Our mission is to rescue people from debt, offer counseling, and educate. If people are looking into different agencies, it’s important to note whether the organization shows genuine care for communities and underserved populations. That really speaks volumes. Can the counselors speak about the ways the organization helps people become educated about money and personal finances? It should be more than, ‘Here’s a service, here’s a program, sign up and we’re done.’ Getting out of debt isn’t just offering a quick fix.”
Ensure the organization is a nonprofit
For-profit debt settlement companies have to meet financial goals and please stakeholders.
“Non-profit credit counselors who are members of the FCAA look at the client’s finances holistically, not just the debt,” said Russell Graves, Executive Director of the National Foundation for Debt Management. “They must provide education and options to keep their non-profit 501(c)(3) status. They work for the clients, not their owners or shareholders.”
“A non-profit credit counseling agency has the best interest of the person in mind, and they’re judged on that to keep their certification,” said Lewis-Parks. “Whereas debt settlement companies are for-profit and not held to the same standards, so they can try to fit people into one of their plans.
“Also, a call to a non-profit credit counselor is absolutely free,” added Lewis-Parks. “So, the counseling session is for them to see the whole picture and then recommend the best course of action and money-saving tools.”
Is the organization accredited and certified?
Accreditation and certification verify that an organization is reputable. When comparing debt settlement versus debt management, look for accredited non-profit agencies that are members of FCAA.
The FCAA requires members to uphold the organization’s standards and best practices. All members show proof of accreditation by an independent organization and maintain counselor certification. They must also provide documentation proving their licensure or registration in the states where they offer services.
Is the organization verified by trustworthy associations?
Hundreds of links and sponsored ads pop up when someone searches “how to pay off credit card debt” or “how to get out of debt.” Checking the status of the organization you choose with an association like the FCAA can help you make an informed choice. Your research will show if the organization truly wants to help or just hopes to profit from your misfortune.
Lewis-Parks advises, “Check the Better Business Bureau and make sure they have a good rating and that any complaints have been resolved. And make sure they are with an association, like FCAA, that holds them to standards and that they’re certified by a well-accepted certification program.”
Warning signs of dangerous debt ‘help’
A fast-tracked conversation or hard sale
“Any time there is a hard sale or hard push to do something, that should sound an alarm,” said Pollack.
Lewis-Parks agrees: “Anyone that tries to fast-track the conversation and comes to a conclusion quickly is a red flag.”
Asking for fees upfront
“An organization or person asking for money or funds for anything on the first call is certainly a red flag,” said Lewis-Parks. “Any sort of pressure tactics like ‘Oh, we can’t do this program tomorrow because some laws are changing’ is also a sign to be cautious.”
Talking about payment or trying to sell you a product before you receive proper counseling
Credit counseling agencies offer consumers a free initial session that is generally an hour long. During the session, the counselor will review your financial life, income, expenses and goals. The session should end with a decision on whether to continue counseling, receive additional help or part ways. There should not be any conversation about paying or buying unless you agree to additional help or counseling in future sessions.
If it just doesn’t feel right
“If something doesn’t sound right, and you’re having second thoughts, you don’t have to do anything on the phone. You can always call back or reach out to another company,” said Pollack. “Do your homework, listen well and try hard to make a rational decision because this will have a really big effect on your life.”
Stories of overcoming debt successfully
Ivan’s story
Ivan came to FCAA member Money Management International (MMI) with about $40,000 of debt accrued across three credit card accounts after experiencing reduced income while self-employed.
Before contacting MMI, he first spoke with a debt settlement company that tried to convince him to default on his debts and attempt a settlement. He decided to get a second opinion from MMI.
MMI advised against settlement since his accounts were still current. MMI was able to reduce his interest rates to an average of just over 1% APR. Ivan repaid his debts in about five years, increasing his credit score to 773 along the way.
Cheryl’s story
Cheryl racked up more than $15,000 in debt on five credit cards. As the interest charges piled on, she found it harder and harder to pay off her debt.
She reached out to FCAA member Consolidated Credit for help. The counselor provided a full debt and budget evaluation to help better understand her situation. Together, they set a realistic budget and determined she could repay her debt through a debt management program.
Consolidated Credit worked with Cheryl’s creditors to lower her interest rates and stop fees applied to her balances. Cheryl was able to pay off her debt in just two years and, through the process, she increased her credit score from 567 to 727.
Story of a disabled dad in debt
A disabled father of four with credit card debt, a mortgage and student loan debt called the National Foundation for Debt Management (NFDM), an FCAA member.
He was ready to sign with a debt settlement agency. They offered a program that required him to pay them so they could negotiate lower debt payments. The program would significantly reduce his monthly payments.
However, NFDM’s housing and credit counselor looked at his entire debt situation and saw that he still wouldn’t have been able to afford the reduced payments. He was upside down with his finances, and when his student loan repayment resumed, he would not be able to feed his family.
The NFDM counselor provided budget counseling, suggested that he see a bankruptcy attorney and referred him to a provider for student loan help.
Three weeks later, the client called the counselor back, saying he had filed for bankruptcy and had his student loans forgiven. He could now move on with his life on a sound financial foundation.
The best option for trustworthy debt help?
Talk to a non-profit credit counselor to avoid the dangers of debt settlement.
“A non-profit credit counseling agency has a lot of tools in their toolbox,” said Pollack. “They can provide financial information and help with a debt management plan if that is what the consumer needs. If a consumer has trouble with their credit card debt and they own a home or have student loans, FCAA members generally have the resources and network to help them.”
Non-profit credit counseling agencies can help consumers with budgeting, student loan counseling, debt management plans, bankruptcy counseling, housing counseling and more. You can trust certified credit counselors to provide honest, dependable, and free or low-cost financial advice.
Take the first step to get trustworthy debt help by trying FCAA’s free budget planning tool, the Debt Freedom Tool. This calculator will give you an overview of your finances and offer to connect you with an FCAA member agency.