Paying ‘here and there’ on nearly $20k of debt isn’t working. I need a plan to get out of this mess.

Credible Money Coach explains credit counseling and provides tips for reader who wants to pay off five-figure debt. (Credible)

Dear Credible Money Coach,

I owe $9,000 on a truck and about $5,500 on credit cards and small loans. I also owe medical bills probably totaling about $5,000. I have been sending money here and there trying to pay all these bills off. How do I go about making up a plan to pay? My fear is I’ll never pay it off. How do I get myself out of this mess? What are the best ways, or companies to go to? — Gary

Hi Gary, and thanks for your question. 

It may give you some comfort to know that you are not alone in struggling with debt —  we get questions every week from people in exactly your situation. 

Household debt has been a big problem in America for a while, and the pandemic didn’t help the problem get any better. In fact, consumer debt hit a new record last year, according to Experian. The average credit card balance is just over $5,300, and the average auto loan balance is nearly $20,000, according to the credit bureau’s data. 

Based on the numbers you shared, your total non-housing debt is around $19,500. You’re absolutely right that inconsistent payments or only making minimum payments will make it difficult to pay off your debt. But with the right plan, you can definitely tackle it. So I commend you for reaching out for help. 

Let’s start by giving you some ideas for where you can get help making a personalized debt-busting plan. 

Where to get help making a plan

Reputable, nonprofit credit counselors can help you make a plan to manage your finances, create a budget and establish a plan for paying off your debt. They can help you decide if a debt management plan is right for you — and DMPs aren’t for everyone.

A credit counseling agency that’s on the up-and-up will provide you with free information about its services and how it works. It won’t require you to make any kind of payment or even ask you to share your personal information just to find out how the agency works. Even though they’re not-for-profit, a credit counselor may have fees, but they should clearly explain their fees upfront.

Tread carefully when looking for a credit counseling agency. Sadly, many individuals and companies who claim they’ll help you get out of debt are only in it to make money — and they could even make your situation worse. Stay away from these.

Start your search for a reputable credit counselor either with the U.S. Department of Justice’s list of approved credit counseling agencies or the National Federation for Credit Counseling. 

Both the DOJ and the NFCC have searchable databases that can help you identify some credit counselors near you. You may also be able to find reputable credit counselors through a local university, military base, local housing authorities, a credit union or your local Cooperative Extension Service.

Before hiring any credit counselor, check with your state attorney general’s office, the Better Business Bureau or your local consumer protection agency to see if the counseling company has any complaints against it.

Run away if a counseling agency …

  • Demands you pay upfront
  • Pushes you toward a debt management plan without first looking at your whole financial situation
  • Charges for educational materials
  • Isn’t transparent about any fees it charges
  • Guarantees it will get your debts forgiven
  • Makes you feel pressured or uncomfortable in any way

Tips for tackling debt on your own

If you decide credit counseling isn’t for you — or if you know it’ll take a while to find the right counselor and you want to get started right away on your own — here are some steps you can take to start paying down that pile of debt.

Need Credible®advice for a money-related question? Email our Credible Money Coaches at [email protected]. A Money Coach could answer your question in an upcoming column.

This article is intended for general informational and entertainment purposes. Use of this website does not create a professional-client relationship.  Any information found on or derived from this website should not be a substitute for and cannot be relied upon as legal, tax, real estate, financial, risk management, or other professional advice. If you require any such advice, please consult with a licensed or knowledgeable professional before taking any action. 

About the author: Dan Roccato is a clinical professor of finance at University of San Diego School of Business, Credible Money Coach personal finance expert, a published author, and entrepreneur. He held leadership roles with Merrill Lynch and Morgan Stanley. He’s a noted expert in personal finance, global securities services and corporate stock options. You can find him on LinkedIn.

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