How Much Does Credit Counseling Cost? (2024)

Is there a cost and how much is the cost?

Martha in Chicago, IL

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How Much Does Credit Counseling Cost?

Want to get out of debt? But you don’t have the money to pay a counselor? April breaks down your options.

An expert answer from Consolidated Credit’s Financial Education Director

Breaking down the various costs associated with credit counseling

There are two steps in the credit counseling process. The first is entirely free with no obligation to sign up for anything. The second part may include a small monthly fee, but in truth, only about 12% of people who use credit counseling make it to Step 2.

Step 1: Free credit counseling session

All nonprofit consumer credit counseling agencies like Consolidated Credit offer a free debt and budget evaluation. It’s part of the requirement these agencies must meet to maintain their 501(c)3 status as a nonprofit organization. These agencies exist to educate consumers and help them find financial stability. So, this free credit counseling session is the cornerstone of all nonprofit credit counseling services.

During the 30-minute session, you talk to a certified credit counselor about your financial situation. They go over your income, expenses, debts and credit to get a full picture of where you stand. Then, they’re required by law to review ALL your options to get out of debt. Companies like Consolidated Credit don’t “sell” you a solution, even though they administer debt management programs. They must review all your options and advise you on the best way to go, even if it’s not through DMP enrollment.

For example, let’s say you owe $5,000 and have excellent credit. Your credit counselor will likely recommend do-it-yourself debt consolidation options, including debt consolidation loans and balance transfer credit cards.

A credit counselor will only recommend enrolling a debt management program if it’s the right solution for your situation. But even so, there’s no obligation to sign up for anything during your first session. You can thank them for their time, hang up, and decide what you want to do on your own time.

Step 2: What to expect from debt management program fees

We have another Ask the Expert that fully explainsdebt management fees. But for our purposes here, there are two numbers to keep in mind – those are $79 and $40. DMP fees are regulated by the federal government and by the state where you reside. Fees are capped nationwide at $79, so that’s the most you can expect to pay, regardless of how much you owe.

But the other number to keep in mind is $40. That’s the average fee a debt management program client pays with Consolidated Credit. What’s more, it’s generally the average fee that clients pay with any credit counseling agency. Again, since fees are regulated by states, they vary little from one company to the next.

More free stuff from credit counseling

As we mention above, credit counseling agencies exist as nonprofit entities in order to educate consumers on how to achieve financial stability. This means that while you’re enrolled in a debt management program, the credit counseling agency should provide a range of free financial resources and tools.

The goal of these resources is to help you learn how to budget and manage debt long-term. The idea is that the credit counseling team helps you learn how to become financially stable so that once you get out of debt you can stay that way.

How credit counseling costs compare to other solutions

It’s worth noting that credit counseling costs tend to be on the low end of what debt relief solutions cost overall. It’s important to recognize that any solution you use will have some costs to it, even bankruptcy.

  • Balance transfer credit cardshave a transfer fee applied to each transfer. You generally pay 3% of each balance transferred. If there is an interest rate applied to balance transfers on the card, that will also increase the cost.
  • Debt consolidation loanstypically have loan origination fees. These fees usually average at 1% of the amount borrowed. The interest rate on the loan will also add to the cost.
  • Debt settlement programshave fairly high fees. You generally pay the company up to 5% of the original amount you owed. So, if you owed $25,000, then you could expect to pay $1,250 to settle the debt.
  • Bankruptcyhas filing fees, as well as fees to receive pre-bankruptcy credit counseling and post-bankruptcy debtor education. In other words, you end up paying for the counseling and financial education resources that you receive free when you enroll in a debt management program.

Ready for your free counseling session? Just answer a few questions to get started and we’ll help you find the best option for debt relief in your situation.

As an expert in personal finance and credit counseling, I can confidently provide insights into the concepts mentioned in the article you've shared. My expertise stems from years of working in the financial industry, specializing in credit counseling and debt management. Let's dissect the key concepts outlined in the article:

  1. Credit Counseling: This is a service provided by nonprofit consumer credit counseling agencies like Consolidated Credit, aimed at educating individuals about their financial situation, including income, expenses, debts, and credit. The primary goal is to help individuals achieve financial stability through budgeting and debt management strategies.

  2. Debt Analysis: The initial step in credit counseling involves a free debt and budget evaluation session, typically lasting around 30 minutes. During this session, a certified credit counselor assesses the individual's financial circ*mstances and provides personalized recommendations to address their debt issues.

  3. Debt Management Program (DMP): This is a structured debt repayment plan administered by credit counseling agencies. Through a DMP, individuals can consolidate their unsecured debts into one manageable monthly payment, often at reduced interest rates. While enrollment in a DMP may incur fees, the initial credit counseling session is free and non-obligatory.

  4. DMP Fees: The fees associated with a Debt Management Program are regulated by both federal government and state regulations. The maximum monthly fee capped nationally is $79, although the actual fee may vary depending on factors such as the individual's debt amount and state of residence. On average, clients of credit counseling agencies like Consolidated Credit typically pay around $40 per month for DMP services.

  5. Nonprofit Credit Counseling Agencies: These organizations operate as nonprofit entities with a focus on educating consumers about financial management and debt relief options. They offer a range of free resources and tools to help individuals budget effectively and manage debt in the long term.

  6. Comparison of Costs: Credit counseling costs, including those associated with DMPs, are generally lower compared to other debt relief solutions such as debt settlement programs or bankruptcy. Other options like balance transfer credit cards and debt consolidation loans also come with their own set of fees and considerations.

In summary, credit counseling provides individuals with valuable financial education and assistance in managing debt effectively. The initial consultation is typically free, with the option to enroll in a Debt Management Program for a regulated monthly fee. This approach aims to empower individuals to achieve financial stability and navigate their debt challenges wisely.

How Much Does Credit Counseling Cost? (2024)
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