5 times to consider credit counseling (and 5 times not to)

Money troubles have a way of snowballing before you even notice it happening. What starts as a simple missed payment, for example, can quickly spiral into mounting debt, collection calls and sleepless nights. And, that's precisely what millions of Americans are dealing with right now when it comes to their credit card debt. Today's average credit card rates are sitting at a record high of nearly 23% and the total amount of credit card debt nationwide is growing in tandem. More cardholders are maxing out their credit limits and becoming delinquent on their payments, too. 

If you're feeling overwhelmed by financial stress and are struggling to keep your head above water, credit counseling is one of the many debt relief options you have to consider. These organizations offer guidance on budgeting, debt management and financial education, which can be vital when you're unable to handle the financial challenges you're facing on your own. They can even negotiate with creditors on your behalf to secure lower interest rates and fees or create manageable repayment plans.

But credit counseling isn't a solution that works in every case. For some financial situations, it's exactly what's needed to regain control, but for others, more drastic measures may be required. So, understanding when to seek credit counseling — and when to pursue alternatives — may save you time, money and unnecessary stress.

Find out how to tackle your high-rate debt today.

5 times to consider credit counseling

Here are some of the situations where it makes sense to seek help from a credit counselor:

• You're struggling to keep up with multiple credit card payments. If you have multiple credit cards with high balances and varying interest rates, credit counseling can help simplify your payments. A credit counselor can work with your creditors to consolidate your payments into one monthly bill, often with lower interest rates and waived fees through a debt management plan.
• You want to improve your financial habits. Credit counseling isn't just about fixing your current debt. It's also about learning how to avoid financial trouble in the future. A good credit counseling agency will provide financial education, budgeting help and personalized advice to help you build better money management skills.
• Your debt is primarily unsecured. Credit counseling is most effective for unsecured debts like credit cards, medical bills and personal loans. If most of your debt falls into these categories, a credit counselor can help you create a structured repayment plan.
• You're considering bankruptcy but want to explore other options first. Bankruptcy is a serious step with long-term consequences, so it's wise to look at alternatives before filing. A credit counselor can help you understand your options and see if a debt management plan or another solution could work instead.
• You're committed to paying off your debt but need structure and support. If you have the means to repay what you owe but struggle with keeping track of payments or high interest rates, a debt management plan can provide a clear path forward.

Explore your debt relief options and get help today.

5 times not to consider credit counseling

Here's when you might want to consider alternative debt relief options:

• You have a large amount of secured debt. Credit counseling won't help much if your primary financial struggles involve secured debts like a mortgage or car loan. In these cases, refinancing, a loan modification or other types of assistance programs might be more effective.
• You can barely afford your basic living expenses. If you're struggling just to cover rent, food and utilities, you may need a more drastic form of debt relief, like debt forgiveness or bankruptcy. Credit counseling won't work if you don't have enough income to make even reduced payments.
• Your debt situation is too severe. If you owe a massive amount of debt and have no realistic way to repay it, a debt settlement program or bankruptcy might be a better option. A reputable credit counselor can help you determine if these routes make more sense.
• You need immediate relief from aggressive creditors. Credit counseling can help you create a structured repayment plan, but it doesn't stop lawsuits, wage garnishments or aggressive collections like bankruptcy can. If you're facing legal action over unpaid debts, you may need legal advice or a bankruptcy consultation instead.
• You're looking to eliminate debt quickly for less than you owe. A debt management plan under credit counseling requires full repayment, though often with reduced interest rates. If you're looking for a way to settle your debts for less than you owe, debt forgiveness or negotiating directly with creditors might be a better option.

The bottom line

Credit counseling can be a valuable tool for borrowers who need help managing unsecured debt, improving financial habits and creating a structured plan to get back on track. However, it's not a universal fix. If your financial situation is more severe, if you're dealing with secured debts, or if you need immediate relief from collections, other options like debt forgiveness or bankruptcy might be more appropriate. The smart approach is to assess your situation honestly and explore all available options before making a decision.