Credit counseling can reduce monthly payments and pay off debt

If you are carrying high amounts of debt and struggling to pay, you may be considering credit counseling. Before taking any steps though, review this advice to make sure you understand credit counseling, and if it offers a possible solution for you.


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  • understand what credit counseling means
  • take time to understand how it works
  • expect collection agencies to stop calling
  • look at the alternatives
  • read up on credit counseling

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  • overlook the importance of budgeting and financial management
  • think that it’s fast – or inexpensive
  • expect total debt amount to decrease
  • seek new credit
  • ignore the statistics

[publishpress_authors_data]'s recommendation to ExpertBeacon readers: Do

Do understand what credit counseling means

While some credit counseling agencies are non-profit, many actually are for-profit. Most of the time, consumers who work with credit counseling agencies enroll in a debt management plan (DMP). These plans often reduce the consumer’s monthly payment obligation, but extend the time over which the consumer pays the debt. Credit counseling agencies are able to extend these DMPs because they maintain pre-arranged agreements with credit card companies. The arrangements allow them to lower interest rates on existing debt to a creditor-issued concession rate.

Do take time to understand how it works

Under the terms of a DMP, you deposit money each month with the credit counseling agency. Then, the agency uses the funds to pay your creditors. Since agencies are able to reduce the interest rates on some of your outstanding balances, your monthly payment may go down.

Do expect collection agencies to stop calling

Calls from collection agencies should cease while you are making payments via a credit counseling program. If they don’t, you should ask them to stop calling and tell them you are in a credit counseling program.

Do look at the alternatives

Talking with a debt relief specialist that is well-versed in all types of debt options is an excellent idea. Credit counseling works well for some people, and not at all for others. Other options can include debt consolidation, whether on your own or through a service, and debt settlement – also known as debt resolution. Every person’s debt and financial situation is different.

Do read up on credit counseling

Review the Federal Trade Commission’s guide on choosing a credit counselor before you talk with any credit counseling agency. They will help you understand the ins and outs of credit counseling and give you insight as to the federal government’s stance on legitimate practices.

[publishpress_authors_data]'s professional advice to ExpertBeacon readers: Don't

Do not overlook the importance of budgeting and financial management

A good credit counseling agency will spend at least an hour in reviewing your overall debt load and financial situation, and do so at no charge. A good credit counselor will evaluate how much you are paying in interest and fees, and suggest options for getting out of debt. A reputable credit counseling agency will work with you to develop better budgeting and financial management skills.

Do not think that it’s fast – or inexpensive

Credit counseling can take several years; the standard length of time for a DMP is five years. In addition, monthly credit counseling fees range from $10 to $15 per enrolled debt account. Over five years, total fees can add up to $3,000.

Do not expect total debt amount to decrease

Credit counseling only reduces interest rates, not the total (principal) amount of debt you owe. In fact, over a five-year period, a debt of $20,000 may wind up costing $30,000 with interest and DMP fees – even after the credit counseling agency’s reduction in interest rates.

Do not seek new credit

Many lenders will not issue credit until a person’s debt management program concludes. Remember this could take five years. While in a DMP, creditors may report that your payments are being made through a credit counseling service, and that the accounts included in the DMP are not being paid as agreed.

Do not ignore the statistics

Credit counseling companies historically have a success rate of only about 26%. Twenty percent of people who enroll leave to self-administer a debt-reduction plan. Many consumers who start a DMP eventually wind up filing bankruptcy because the DMP payments still are more than they can afford.


Credit counseling can be very helpful for individuals who can stick with the program over several years, and who can make the payments resulting from a lower interest rate. If you do have debt, make sure to review the pros, cons, and alternatives carefully before making any decision.

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