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To stop a downward financial spiral, you may think turning to a debt counseling service is the answer. Before you go, do your homework to avoid digging an even deeper hole.

"When consumers find themselves in financial distress, it is critical that they face the problem head-on. Many benefit from sitting down with a trained and certified credit counselor," says Gail Cunningham with the National Foundation for Credit Counseling (NFCC).

Be careful when selecting a service, she warns. Some counseling services charge high fees and can actually damage your credit while they help you pay off your debts.

To ensure you're hiring a legitimate service, Cunningham recommends asking these five questions.

  1. Is the agency affiliated with a national organization, like the NFCC, which requires strict financial and ethical standards for membership?
  2. What fees are associated with the services? No fee should be charged before the service is provided. Any setup fee or monthly fee should be in the $50-or-less range, with monthly fees in the $25 range.
  3. How long does a counseling session last? Avoid quick, "drive-by" counseling. An initial session should last at least one hour to assess your income, expenses and debts adequately.
  4. What happens to your first payment? Your first payment should go toward your debt. It should not be used as a donation to the agency.
  5. Will the full amount of your payments be disbursed to your creditors? The full amount should go toward the repayment of your debts, with no portion going into the agency's pocket.

An extra word of caution: Check the Better Business Bureau for unresolved complaints against the organization.

How to Get Back on Track
Know what you owe. Gather up your bills and statements and total up your debts and monthly obligations.

Don't dig any deeper. Stop using credit cards immediately. Be cautious of 0% balance transfer offers. Read the fine print to see if fees are charged and if the interest rate bumps up after an introductory period.

Contact your creditors. They may be willing to offer you lower interest rates or revised payment plans. Find the customer service number on the back of your credit card or on your loan statement.

Attack debt systematically. First, pay off credit cards with the highest interest first. Then, roll that payment to the next card, and keep repeating the step.

Seek free help. Use online calculators like USAA's Debt Analyzer, or email a USAA financial advisor to help identify strategies you hadn't considered.

Joseph "J.J." Montanaro is a CERTIFIED FINANCIAL PLANNER(tm) practitioner with USAA Financial Planning Services, one of the USAA family of companies. Montanaro has 15 years of experience in the financial services industry as a financial planner. He served in the U.S. Army for six years on active duty, and in 2009 he retired as a Lieutenant Colonel in the United States Army Reserve.

About USAA
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