Trying to figure out the best way to deal with your debts can feel like standing at a crossroads, wondering which path to take. It’s not always clear which options are on the table based on your specific financial circumstances, let alone which ones will fit your needs best. And, while it’s only natural to want to get started on getting rid of your debts as soon as possible, choosing the wrong strategy — or getting involved in a debt relief scam — can leave you in worse shape than before you started.
In other words, it literally pays to understand the pros and cons of each option, as well as whether it makes sense based on your income, debt levels, lifestyle and more. Getting a personal debt assessment during the research stages is one way to help you understand which debt relief options might be worth pursuing.
Here’s more on what this process entails.
Personal Debt Assessments During Credit Counseling
Just like you might fill out a health assessment when arriving at a doctor’s office to help nurses and clinicians better understand your symptoms, a personal debt assessment is meant to help you better understand your debts — so you can figure out a “treatment.”
One way to get a thorough — and oftentimes free — personal debt assessment is with a credit counselor. The role of these professionals is to help consumers better understand their household budgets, their debts and their realistic options. Contrary to popular belief, credit counselors do not just exist to fulfill a mandatory step in bankruptcy proceedings; they are often equipped to help consumers in a wide range of other situations as well.
Here are some questions you can typically expect to answer as part of a personal debt assessment during a credit counseling appointment:
- What is your household income?
- What are your household’s monthly expenses?
- Do you have a budget?
- What credit cards and other debts do you have?
The counselor will usually also look at your credit report. You should provide the documentation needed to answer these questions — from a current list of expenses to paystubs.
These factors will help the counselor decide which solutions might work best for you.
Personal Debt Assessments During Debt Relief
Another point at which you may encounter personal debt assessments is when you’re fact-finding about different debt relief options. A representative should be more than willing to talk to you about your needs before they agree to start the process of enrollment — as well as outline the possible advantages and disadvantages of participating.
Hint: When you’re wondering “Are debt relief programs legitimate?” consider the presences or absence of a personal debt assessment a major indicator.
The types of questions you can expect to answer pertain mostly to the nature of your debt — namely the types and amounts. Many debt relief programs require enrollees to have a minimum amount of debt to enroll. For instance, a lot of settlement programs set a threshold of $5,000 or $10,000 to take part.
If you find, during the initial debt assessment, you do not meet one or more of the major criteria, you may be ineligible to enroll. However, even if you are eligible, you may be better off continuing to explore your options.
Finally, you may feel more comfortable starting out by assessing your debt on your own using an online tool or service. You’ll find a few options at The Balance, but there are many others out there as well.
A personal debt assessment is a tool meant to help you take stock of your debts and decide upon the best strategy for eliminating them. You can access these through credit counseling, through an initial consultation with a reputable debt relief service or even on your own.