Looking for debt relief? This is how debt counseling can help

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Nonprofit credit agencies provide free or low-cost financial services to consumers who are struggling to manage their debt or are considering bankruptcy. Here’s what a credit counselor can do for you. (iStock)

Unmanageable debt with high interest rates can take a heavy toll on a consumer’s finances. It may seem that no matter how much you try to pay back, the balances will just keep growing as interest accrues over time.

Ten percent of Americans fear missing a minimum debt payment in the next 3 months the Federal Reserve Bank of New York. Defaulting on payments can lead some consumers to consider bankruptcy – and worst-case scenarios Collection agencies can sue borrowers over unpaid debts, leading to a garnishment of wages.

If you’re struggling to pay off debt, you may consider enlisting the help of a nonprofit credit counseling agency. Credit counselors can help you develop a plan to pay off multiple types of debt, such as: B. credit cards, unpaid medical bills and payday loans.

Read on to learn more about credit counseling and your alternative debt consolidation options. You can Compare interest rates on debt consolidation loans for free without affecting your credit score with Credible.

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What is credit advice?

Nonprofit credit agencies provide free, low-cost financial services to consumers struggle to manage their debt. Some consumers who file for bankruptcy may need to seek credit counseling as part of their court filing. A credit counselor can help you by:

  • Advice on dealing with money and debt
  • Analyze your finances and create a monthly budget
  • Obtain free copies of your credit report and credit scores
  • Signing up for a Debt Management Plan (DMP), which may incur monthly costs
  • Negotiating with your creditors on your behalf to lower interest rates and waive late fees

Consumers should be aware that some for-profit debt management companies may masquerade as non-profit organizations. A reputable credit counseling center should provide you with free information about the services they provide the Office for Consumer Financial Protection (CFPB). When a consultant is unwilling to provide this information, it is a red flag.

You can find reputable credit advisors through some trade organizations such as the National Foundation for Credit Advice (NFCC) or the Financial Counseling Association of America (FCAA). A full list of approved credit agencies can also be found at the website of the Department of Justice.

To learn more about your alternative debt consolidation options, Consult a knowledgeable credit professional at Credible.

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3 alternative debt settlement methods

Credit counseling is a relatively low-risk way to manage multiple debts, but it’s not your only option. Here are a few other strategies for quickly paying off debt.

1. Debt avalanche or debt snowball

The debt avalanche method is when you pay off the debt with the highest interest rate first in order to save the largest amount of money over time. On the other hand, the debt snowball method is when you pay off the smallest balances first to jump-start your debt-repayment plan.

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2. Credit Card Balance Transfers

It may be possible to transfer the balance of one or more credit cards to a new account at a lower interest rate by a Credit transfer card. Credit card issuers usually charge a fee of 3-5% of the total amount for the final balance transfer.

Some consumers may even qualify for one Introductory offer with 0% APR, which allows you to pay off your credit card debt without interest over a period of up to 18 months. These promotions are typically reserved for borrowers with very good to excellent credit ratings, as defined by the FICO model than 740 or higher.

You can Compare prepaid transfer cards through multiple credit card issuers at the same time on Credible.

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3. Debt Consolidation Loan

A Debt Consolidation Loan is a type of personal loan used to pay off unsecured debt at a lower, fixed rate of interest. Personal loans are lump sum loans that you pay back in monthly installments over a set period of time, usually a few years.

Interest rates on two-year personal loans are currently at record lows, according to the Federal Reserve, meaning there’s never been a better opportunity to refinance your debt at a lower interest rate. Keep in mind that the interest rate you qualify for depends on your credit rating and debt-to-income ratio.

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A current analysis estimates that well-qualified applicants could potentially save up to $174 on their monthly payments by consolidating their credit card debt into a personal loan. Over time, this can add up to thousands of dollars in interest savings.

If you are curious about this strategy, use a personal loan calculator to estimate your monthly payments. You can also visit Credible Compare interest rates on debt consolidation loans to determine if this debt repayment strategy is right for your financial situation.

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Do you have a financial question but don’t know who to contact? Email The Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert section.

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