Debt has a way of creeping up on us if we let it.

Even for those who manage debt well, unexpected life changes can result in difficulty making ends meet.

When we find ourselves having problems with debt, the first course of action is to take a look at your monthly budget. Finding ways to cut back on unnecessary expenses can help pay down debts and keep monthly bills current.

But what happens when you can’t solve debt problems with budgeting?

Sometimes it pays to get outside help.

It’s hard to go to someone else when you’re having money troubles, but if you don’t gain control over your debts, your credit rating will suffer. So, it’s important to take charge before it’s too late.

Some debtors turn to debt consolidation as an answer to debt problems. They transfer high-interest debts to a lower interest credit card, or they put up the equity in their homes to get the money to pay them off. While these options can provide lower payments, they are not without drawbacks.

Closing numerous accounts and putting all of your debt into one account can negatively affect your ratio of debt to available credit, lowering your credit score. And if you use your home equity to secure the money needed to pay off debt, you’re putting your home at an unnecessary risk.

Another popular option for those with debt problems is credit counseling.

Credit counseling agencies offer help with budgeting, and in some cases, they will set you up with a debt management plan. A debt management plan involves negotiation with creditors to obtain lower interest rates and lower payments. The debtor makes one monthly payment to the credit counseling agency, and the agent forwards payments to each creditor.
A debt management plan can help you get out of debt faster, but it can also impact your credit. A note is added to your credit report stating that you are undergoing credit counseling. This means that you can’t get new credit. However, the notation is removed once you’ve paid off your debts.

Just make sure they are reputable.

When considering credit counseling agencies, make sure they’re members of the Association of Independent Consumer Credit Counseling Agencies (AICCCA) or the National Foundation of Credit Counseling (NFCC). These organizations regulate and monitor member agencies, making sure that they operate legally and ethically.

That’s why it’s important to keep your debt at reasonable and manageable levels, or you could end up incurring insane interest charges and scraping by just to make your monthly payments.

By seeking help at the first sign of trouble, you can often prevent debts from spiraling out of control.