See a credit counselor when debt is the problem: you’re behind on payments, the balances keep growing, or you’re thinking about bankruptcy. Most nonprofit agencies counsel for free, and they can set up a debt management plan with your creditors. See a financial planner when the bills are paid and the question is what to do with your money: saving, investing, taxes, retirement. Fee-only planners charge a median $300 an hour or $2,000 for a one-time plan. If you’re not sure which you’re in, start with the counselor. It’s usually free, and getting the debt stable comes before any plan.
The short version
| Credit counselor | Financial planner | |
|---|---|---|
| Best for | Debt you’re struggling to pay | Decisions about saving, investing, taxes and retirement |
| Typical work | Budget review, credit report review, a debt management plan | A written plan, specific recommendations, ongoing advice |
| Works with your creditors | Yes, through a debt management plan | No |
| Usual organization | Nonprofit agency | Private advisory firm |
| How it’s paid | Grants, creditor contributions, some client fees | You, by the hour, per plan, yearly or as a share of assets |
| Typical cost to you | Counseling often free; plan fees vary by state | A median $300 an hour, $2,000 per plan |
| Regulated by | Tax rules for nonprofits, plus state law | The SEC or the state, if advising on investments |
What a credit counselor does
The CFPB describes it simply: counselors “discuss your financial situation with you and help you develop a personalized plan to solve your money problems.” A first session usually covers your income, spending, every debt you owe and your credit report. Many agencies also run free workshops on budgeting and credit.
If your debts are mostly unsecured, like credit cards, the counselor may suggest a debt management plan. You make one monthly payment to the agency, and it pays your creditors, who may lower your interest rate or waive some fees. Two things to know before you start, from the FTC:
- A plan “can take 48 months or more to complete.”
- You may have to agree not to apply for or use any new credit until it’s finished.
The CFPB adds one more: confirm that your creditors have accepted the plan before you pay the agency anything.
If you’re considering bankruptcy, you’ll need a counselor anyway. The US Trustee Program says credit counseling “must be obtained before an individual files for bankruptcy,” from an agency on its approved list, or the case can be dismissed.
How credit counselors are paid
Most counseling agencies are nonprofits, and that shapes the price. The National Foundation for Credit Counseling (NFCC), a network of nonprofit agencies, says “most NFCC-member agencies offer free credit counseling,” while some charge for specific services, with fees that “vary depending on the agency and state law.” You may qualify for a fee waiver on a debt management plan based on income or military service.
The tax code backs this up for nonprofit counseling agencies. To keep their tax exemption, they must not refuse counseling “due to the inability of the consumer to pay,” must keep fees “reasonable,” and must allow fees to be waived when you can’t pay.
The rest of their money comes from grants, fundraising and, in the NFCC’s words, “voluntary contributions from creditors who participate in our debt management plans.” That’s a real conflict of interest to keep in mind: your creditors help fund the agency. Federal law limits it: a charitable agency can’t get more than half its revenue from creditors’ payments for debt management plans. Still, ask the counselor to walk through every option, including bankruptcy, and get any fee in writing.
What a financial planner does
A planner looks forward. Once the debts are manageable, the questions change: how much to save and where, whether to pay extra on a loan or invest, how to use your employer’s benefits, when you can retire. A good planner handles debt too, as part of the plan, but won’t negotiate with your creditors.
Planners who advise on investments for pay have to register with the SEC or the state, and a fee-only planner is paid only by you, so nothing they recommend earns them a commission. That matters at this stage: a planner paid by products can turn a debt conversation into a pitch for insurance or a loan.
What each costs
Credit counseling. Often free for the counseling itself. Debt management plans may carry a setup fee and a monthly fee. Neither the NFCC nor the CFPB publishes typical amounts, because they depend on the agency and on state law. Ask for the total in writing before you sign.
A fee-only planner. Among firms that publish prices:
- Hourly: a median $300, with a quarter of firms at $250 or less. One or two hours is often enough to set a debt payoff order and a savings plan. See what an hourly planner costs.
- A one-time plan: a median $2,000, with a quarter of firms starting at $845 or less. See what a one-time plan costs.
- Ongoing planning: a median $4,500 a year, more than most people need while paying off debt.
Minimums are rarely the barrier. Of 781 fee-only firms whose websites state a minimum, 50% say they have none. For free help with taxes, housing and student loans, see affordable financial advice.
When a credit counselor is the better choice
- You’re behind, or about to be. Missed payments, collection calls, balances growing faster than you can pay.
- Your interest rates are the problem. A debt management plan may get creditors to lower them, which you usually can’t do on your own.
- You’re considering bankruptcy. You’ll need approved counseling before you file, and a counselor can tell you whether there’s another way first.
- You can’t afford to pay for advice. Counseling is often free, and reputable agencies help even if you can’t pay their fees.
When a financial planner is the better choice
- The bills are paid and you want a plan. Paying debt down faster while still saving for retirement is a planning question.
- Student loans with real choices. Repayment plans and forgiveness interact with taxes and savings. See student loan advisors in the public graph.
- A decision with tax or investment consequences. Using a bonus, buying a home, changing jobs, starting to invest.
- You’re early in your career. See advisors for early-career professionals and flat-fee advisors who don’t require assets.
Many people use both, in order: a counselor to get the debt stable, then an hour or a one-time plan with a planner once it is.
How to check which one you’re talking to
For a credit counselor:
- Ask if it’s a nonprofit, and who accredits it. Nonprofit status doesn’t guarantee a fair deal, so ask what it charges, in writing.
- Make sure it’s counseling, not settlement. Debt settlement companies negotiate to pay less than you owe, usually for a fee. The FTC says a settlement company “can’t collect its fees from you before they settle your debt.” Anyone asking for money up front to settle debts is a warning sign.
- For bankruptcy, use the approved list. The US Trustee Program publishes the agencies that qualify.
For a financial planner:
- Search the firm and the person on the SEC’s adviser search (IAPD). A registered adviser shows up there or with your state.
- Read the Form CRS for fees and conflicts, and ask: “Do you earn anything from products, loans or services you recommend?”
- Ask for the price in dollars. A planner who bills by the hour or per plan, often called advice-only, should give you a number before you start.
Our guide to checking a financial advisor covers the rest. If the hardest part of the debt is the habits behind it, read financial coach vs financial planner, or financial therapist vs financial planner if money causes real stress or conflict.