Alternatives to Debt Counseling

You may be thinking that speaking directly with your creditors and/or collections agencies can get you the best deal to gain control of your debt. However, negotiating a viable deal that takes into consideration your current financial situation and your future goals can be time consuming and emotionally draining. That’s where a debt counselor can help you.

Dealing with Creditors

Creditors may be able to offer some concessions if you call them and express a concern about repaying your debts. They may be willing to lower your minimum monthly payment to help you avoid missing a payment. Some creditors even refer their customers to credit counseling if they think it is necessary. While it can be a good idea to reach out to your creditors if you are facing financial difficulties, they can only help you with one account. Debt counseling looks at your entire fiscal picture, all of your debts and expenses, and helps you come up with a solution for every aspect of your financial life.

Dealing with Collectors

Collection agents may propose payment schedules and payoff plans to collect on debts you owe, but their only objective will be to collect the money owed to them, not to help the consumer make the best decisions. Collectors are notorious for calling debtors constantly, making threats, and in some cases violating the Fair Debt Collection Practices Act. A debt counselor can help you understand your options and deal with collection accounts without being bullied, threatened or judged.

Loss Mitigation Departments

If you are concerned about being able to repay your mortgage, you should talk to the loss mitigation department of your mortgage lender. Since mortgage debt is so much larger than typical revolving debts, they make every effort to work out solutions with their borrowers. Any responsible loss mitigation specialist will probably refer you to HUD-approved housing counseling. Even while receiving HUD housing counseling, it’s good to keep the lines of communication open with your lender.

Debt Settlements

A debt settlement is when a borrower settles a debt for less than the full amount owed. The lender must agree to accept less than the full amount, and this arrangement is indicated on the borrower’s credit record. Usually, people use the services of a professional debt settlement negotiator; in some rare cases, this negotiator may also be certified as a debt counselor. (See “6 Things to Consider Before Using a Professional Settlement Negotiator.”)

Debt Consolidation

Any consumer facing overwhelming debts will be unlikely to be approved for a debt consolidation loan, but some services offered by debt counselors include consolidated monthly debt payments, which confers the advantages of debt consolidation along with the benefits that come from professional counseling services. Even those consumers who are able to get a consolidation loan or consolidate their debts through balance transfers could benefit from a free debt counseling session, since debt consolidation by itself does not offer the education and assistance a counselor provides.