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Managing your finances 鈥斅爀specially when you have a lot of debt 鈥斅燾an be overwhelming. With determination and the right resources, you may be able to mend your finances on your own. But if you鈥檙e struggling to pay your bills or to聽tackle mounting debt, you may need help.

One option is聽working with a credit counselor. Certified consumer credit counselors are employed by nonprofit agencies that are accredited by the聽National Foundation for Credit Counseling. These agencies provide financial education services and counseling for credit, debt, bankruptcy, housing and other issues. Many services are low-cost or free.

We talked with Thomas Nitzsche of聽Clearpoint, an NFCC agency and member of NerdWallet鈥檚聽Ask an Advisor network,聽about when credit counseling is a good idea for consumers.

In what cases does it make sense to talk to a credit counselor?

There are a number of scenarios. For instance:

• If you are struggling to meet your monthly credit card and/or mortgage payment, considering bankruptcy, or just want help setting and meeting your financial goals, it鈥檚 a great idea to seek free advice and resources.
• If you are considering or have been turned down for a consolidation loan for your unsecured debt (for instance, credit cards and personal loans), you might be a good candidate for a debt management plan administered by the credit counseling agency.
• If you are considering purchasing a home, a credit counselor can provide pre-purchase counseling.
• If you are struggling with debt, a credit counselor can help you navigate the crowded debt-relief space, avoiding scams and damage to your credit score.

How will working with a credit counselor help you?

Your credit counselor will listen to your financial goals and then gather your information to help you organize your finances,聽develop a budget聽and create a personalized action plan to meet your goals. For most clients, this usually involves improving their credit, repaying debt or achieving their housing objectives, such as buying a home, obtaining a reverse mortgage or avoiding foreclosure.

The counselor can pull your credit report and offer a detailed review, in most cases also providing your聽FICO credit score聽and pointing out discrepancies to dispute, dings to avoid in the future and ways to improve your score聽going forward. Once the review is complete, your counselor will provide next steps and appropriate referrals to local resources for help with specific issues you may be facing. Referrals may be for things like utility or down payment assistance, local grants, free or reduced-cost health or dental clinics, directions on filing for financial assistance on a medical bill and many other resources. This initial consultation is free, with no obligation.

What role do debt management plans play in working with a credit counselor?

A debt management plan is one option available to you when working with a credit counselor. It is a full repayment of your unsecured debt with reduced interest rates. On average, a debt management plan reduces interest rates by half and total monthly payments by 20%, according to Clearpoint鈥檚 findings. Most debt management plans last less than four years and, on average, we鈥檝e found that clients increase their credit score by 106 points in the first 36 months. The average client鈥檚 debt load at Clearpoint is nearly $26,000 spread across six creditors, but even the most聽indebted consumers聽can benefit from debt management. There are nominal fees for a debt management plan, which vary by state but do not exceed $50 per month. In cases of extreme financial hardship, fees may be reduced.

We find that about one in five consumers who seek credit counseling eventually enroll in a debt management plan to lower their interest rates and payments on existing unsecured debt. In addition to helping you consider a debt management plan, a credit counselor can point you to educational tools such as online learning platforms and calculators, which will help deepen your understanding of financial concepts.

For whom is a debt management plan a smart option?

A debt management plan might be a good choice if you have steady income, sufficient to cover your living expenses plus your modified monthly debt payments to your creditors. A good rule of thumb is that if your non-mortgage聽debt-to-income ratio is above 15%, you may not be able to effectively self-pay your debt; thus聽a debt management plan could be a good option.

While there鈥檚 no credit score stipulation for a debt management plan, consumers with higher credit scores may be able to聽consolidate their debt聽via a balance transfer, or other method that has higher net savings compared with聽a debt management plan. However, the education that accompanies a debt management plan is an added benefit for some consumers, especially since聽other debt relief options, such as the use of a debt settlement company or 鈥渃redit doctor,鈥� can be risky.聽Debt settlement聽requires a severe default, which damages credit, and there is no guarantee that the creditor will agree to the settlement. There can also be tax implications and fees that add to your total debt.

Debt management plans work best if your debt is still being handled by the original creditor, not a third-party collection agency. If your debt is already in collections, or you do not have sufficient funds to cover your living expenses even after making changes to your budget, then the debt management plan may not be the best choice. If you are more than 90 days past due (鈥渋n collections鈥� or 鈥渃harged off鈥�), you may need to consider reaching a payment arrangement or settlement agreement directly with your creditors, or seeking legal advice if this is not possible. If your budget is negative even after making all possible cuts and trying to increase your income, you may need to seek legal advice to see whether聽you are聽eligible for bankruptcy聽and, if so, which chapter. In some rare cases, if you are 鈥渏udgment-proof鈥� or the debt is 鈥渢ime-barred,鈥� you may not have to take any action at all. A credit counselor can help you determine the best course of action based on your individual circumstances.

Thomas Nitzsche is the media relations manager of聽Clearpoint Credit Counseling Solutions.

The article聽When Credit Counseling Is (and Isn鈥檛) a Good Idea聽originally appeared on聽NerdWallet.