How Much Does Credit Counseling Cost?

Is there a cost and how much is the cost?

Martha
Chicago, IL

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 explains debt 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 with 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.