How Much Does Debt Counseling Cost?
Roughly 6 in 10 consumers find it difficult to minimize their debt due to unexpected financial emergencies or reduction of income, according to a Harris Poll survey conducted by the National Foundation for Credit Counseling. Relatedly, more U.S. adults carried a credit card balance from month to month in 2020 compared with 2019, and 27% admitted they did not pay all of their bills on time. If your debt feels oppressive—or, worse, overwhelming—a nonprofit credit counseling agency may be able to offer advice and support for free.
A certified counselor can train an objective eye on your finances, help you formulate a strategy for coping with debt and other financial challenges, and even offer a plan that can help put your finances on the right track. Nonprofit debt counseling costs can vary from state to state but are meant to be affordable to people who need this service—and may even be free if you qualify for financial help.
What Is Debt Counseling?
Debt counseling—also known as credit counseling—involves meeting with a trained counselor who will evaluate your financial situation and find possible solutions for your issues with debt. The process begins with a 30- to 60-minute counseling session that involves going over information about your income, expenses, savings and what you owe. The counselor will offer insights and suggest alternatives for paying down your outstanding balances. In many cases, this preliminary counseling session is free.
One of the options a credit counselor may suggest is debt management plan (DMP). Here, the counseling agency works with your creditors to reduce your interest rates and may be able to extend your payment timeframe. They roll all of your monthly debts into a single payment you make to the debt counseling service, which will then pay your creditors.
Having a debt counseling agency make payments on your behalf does a few things. For one, it simplifies your monthly payments so you’re less likely to forget making a payment on time. You also know exactly how much money you need to cover all of your debts for the month. The goal is typically to pay off your debt in three to five years, which gives you a light at the end of the tunnel.
A DMP is not to be confused with debt settlement. Debt settlement involves a paid representative attempting to negotiate with your creditors to reduce the amount of debt you will repay. While this may offer you some relief, it also can hurt your credit in several ways. Settled accounts appear as negative information on your credit report, and the settlement process may require you to stop making payments toward your debt, which will then be counted as late. Debt settlement can be costly as well. If you’re contemplating this strategy, make sure the cost of settlement plus the damage to your credit score and report don’t outweigh the money you’ll save by settling your debt for less than what was originally owed.
Is Debt Counseling Expensive?
Nonprofit debt counseling agencies are created to serve the public interest by educating people about personal finance. To that end, their services are meant to be affordable and many of their services are free. When these agencies do charge, their fees are intended to cover their expenses—and not to turn a profit.
With many nonprofit credit counseling services, the initial consultation is free. If a credit counselor suggests a DMP and you agree to move forward, you may be asked to pay a setup fee and an ongoing monthly charge. Limits on these fees can vary by state. In California, for example, DMP fees may not exceed 8% of the amount paid to creditors or $35, whichever is less. California also allows for a $50 (maximum) education and counseling fee. Nationwide, DMP fees are capped at $79.
Be wary of a counseling service that is for-profit or asks for hundreds or thousands of dollars upfront. Debt counseling should help improve your financial outlook, not send you further into debt. “Get a specific price quote in writing,” the Consumer Finance Protection Bureau advises. “If an organization won’t help you because you can’t afford to pay, look elsewhere.”
Even if a DMP requires a modest setup charge and monthly fees, it should help you reduce your interest costs and make your payments more manageable. If you’re presented with a plan that doesn’t accomplish these goals, think twice about its usefulness.
How to Get a Debt Counselor
Finding the right debt counselor is key. Steer clear of any for-profit credit counseling agencies, and be sure to do your due diligence in other regards as well.
The National Foundation for Credit Counseling refers consumers through its network of member agencies nationwide. Foundation-certified counselors adhere to professional and training standards and are committed to providing affordable services to credit-challenged consumers. The Financial Counseling Association of America also offers referrals. Its members agree to the association’s standards and best practices, which includes adhering to IRS rules regarding nonprofit credit counseling agencies.
The U.S. Department of Justice maintains a list of approved credit counseling agencies. You can visit the Justice Department website to search by state or judicial district. You can also check with your state attorney general’s office to learn more about credit counseling regulations in your state and look for a list of approved agencies.
Alternatives to Debt Counseling
If you aren’t ready to commit to debt counseling, you can also consider do-it-yourself options for paying off credit card debt. Two popular approaches to dealing with debt are the avalanche and the snowball:
- Avalanche strategy: Budget as much money as possible each month to use toward paying down credit card debt. Then, make minimum payments on all of your cards except the one with the highest interest rate; use all of your remaining credit card payment money to pay down the card with the highest interest rate. Continue with this strategy until the highest-interest card is entirely paid off, then pay down the next-highest-interest card the same way.
- Snowball strategy: This strategy is similar to the avalanche, but instead of starting with your highest-interest card, start with the card that has the smallest balance. When it’s paid off, take aim at the card with the next smallest balance and continue until all of your cards are paid off.
Another alternative to credit counseling is a debt consolidation loan. This is essentially an unsecured personal loan you use to pay off your credit card balances. You’ll still carry debt, but usually at a lower interest rate than your cards charge. Debt consolidation loans also provide structure: You pay the same amount monthly for a set period of time—typically three to five years—and then you’re done with your debt. Personal loans are available for borrowers with a range of credit scores, but you’ll have better luck finding a favorable interest rate and terms if you have good credit. Use Experian’s loan comparison tool to learn more about debt consolidation loans and see a list of loans personalized to your credit profile.
Taking Charge of Your Finances
As you go, monitoring your credit score and report can help you track your progress as you pay down debt and, hopefully, improve your credit. Taking on your challenges with debt isn’t a fast fix. But getting objective help and guidance from a trained debt counselor can be a productive step toward finally taking charge of your finances.
Instantly raise your FICO ® Score for free
Use Experian Boost ® to get credit for the bills you already pay like utilities, mobile phone, video streaming services and now rent.
Start your boost
No credit card required
About the author
Gayle Sato writes about financial services and personal financial wellness, with a special focus on how digital transformation is changing our relationship with money. As a business and health writer for more than two decades, she has covered the shift from traditional money management to a world of instant, invisible payments and on-the-fly mobile security apps.
Explore more topics
Share article
Experian is a globally recognized financial leader, committed to being a Big Financial Friend—empowering millions to take control of their finances through expert guidance and innovative tools. As a trusted platform for money management, credit education, and identity protection, our mission is to bring Financial Power to All™.
- Security freeze
- Fraud alert
- Disputes
- Denied credit
- Identity theft victim assistance
- Active duty military
- Opt out of prescreen offers
- Upload a document to Experian
- Credit report & scores
- Fraud & identity theft
- Banking
- Credit cards
- Loans
- Insurance
- Mortgage
- Investing
- Personal finance
- News & research
Frequently Asked Questions
FAQS –>
01 How do I make a payment?
02 What is your disbursement calendar?
03 What services does the Agency provide?
We provide confidential credit counseling, personalized debt management plans, comprehensive credit reports and scores, pre-filing bankruptcy counseling and pre-discharge bankruptcy education, individualized housing counseling, community financial education programs and Representative Payee services for Seniors and Disabled individuals with the Oregon Money Management Program.
04 How long has CCCS been in business?
The Agency has been providing professional credit counseling and financial education in Southern Oregon and Northern California since 1971. Since that time we have counseled over 30,000 families, returned more than $35 million dollars to local and national creditors through debt management programs, and presented thousands of educational classes to help people learn more about managing their money.
05 Are you licensed?
We are licensed by the State of Oregon and State of California and are in compliance with all State and Federal regulations. Our Oregon license number is DM-80115. We are also authorized by HUD to provide housing counseling, by the Executive Office of the US Trustees to provide pre-filing bankruptcy counseling and pre-discharge education, and by the Oregon Department of Human services to be the local coordinator for the Money Management Program.
06 Is the Agency accredited?
We are accredited by the Council on Accreditation. This national accreditation guarantees that the Agency provides professional counseling and education and meets all of their quality standards. In the most recent review they stated that “the education and outreach efforts of this organization are impressive. The services are comprehensive and focus on the needs of the client and the community.”
07 Are your counselors certified?
All of our counselors are certified by the National Foundation for Credit Counseling. In addition, our housing counselors are certified by HUD to provide reverse mortgage counseling. They have over 50 years of combined experience providing help in our community.
08 Why people choose CCCS of Southern Oregon?
There are many companies that claim to provide help to people who need help with their finances. Unfortunately, some of those companies make promises that they are unable to keep. People can feel secure receiving help from CCCS of Southern Oregon. It has over 40 years of experience and thousands of satisfied customers.
09 What sets Consumer Credit Counseling Service of Southern Oregon apart from other credit counseling agencies?
We were started in 1971 and in that time we have built a long track record of assisting consumers in improving their personal finances through counseling and education programs. We are a community based non-profit and all of our counselors are fully certified by the National Foundation for Credit Counseling (NFCC). We are also fully accredited by the Counseling on Accreditation (COA).
10 How Will Bankruptcy Affect My Credit Score?
If you choose to file for bankruptcy, you should know that your bankruptcy will affect your credit report. A bankruptcy does not delete accurate information from your credit report regarding your past delinquencies, bankruptcy is a matter of public record and will be reported in the public section of your credit report. A bankruptcy will have a negative effect on your credit report and credit score. A potential creditor, landlord, or employer in the future may view this negatively. Depending on the type of bankruptcy you file, it many remain on your credit report for 7 to 10 years. If you choose a Debt Repayment plan as an alternative to bankruptcy, be advised that your accounts will be closed upon submission of proposals with could have a negative impact on your credit score.
11 I have some serious problems with my credit. Will your counselors be understanding?
All of our counselors are understanding that we all make mistakes and occasionally have problems. We are there to help you resolve the problems and move on with your life. There’s no lecturing from our counselors, only understanding.
12 I have big financial problems. How can you help me?
Our credit counselors, housing counselors, student loan counselors and educators meet with clients individually to offer personalized advice on steps you can take to improve your situation—it’ step by step. It might be to create a budget, prioritize bill payment, strategize to paying down debt, learn a debt payment plan.
Many of our clients are so overwhelmed by their financial situation that they don’t know their options or next steps. It’s helpful to have an experienced and understanding financial expert to help you take stock of the situation, and offer suggestions on how to proceed.
In cases of very high credit card debt, our counselors may suggest a debt management program, also known as DMP’s.
13 What are the prices for your services?
Many of our services are offered free-others at low costs. When you contact us we can talk about the costs.
14 How are you funded?
We receive funding through multiple sources—mostly community grants, donations from past clients who appreciated our services and voluntary contribution from creditors who participate in our debt management program and client fees.
15 I live out of the area. Do I have to physically come in for counseling?
No, we are happy to provide counseling by phone. Many clients live out of the area and seek our help. We have a toll free phone line.
16 Who owns your agency?
We are a community based non-profit and we are governed by a volunteer board of directors made up of community members.
17 How long will it take to pay off my debts?
On your own, it may take ten or more years to pay off an average debt amounts when making only minimum payments. We can devise a debt management plan to significantly reduce or eliminate most unsecure debt within three to five years.
18 I have heard of a Debt Management Plan. What is it?
A debt management program is a payment plan between you, us, and your unsecured creditors. In this plan, creditors agree to offer special concessions to help you get out of debt. These concessions may include reducing your interest rate and stopping late and over limit fees. This plan can reduce the months or even years of payment. We have counselors that are familiar with these services and will be happy to review them with you.
https://www.experian.com/blogs/ask-experian/how-much-does-debt-counseling-cost/https://improvedcredit.org/faqs/
