A Guide to Financial Advisor Debt Counseling

Credit cards, student loans and other types of debt can be major roadblocks to reaching your long-term financial goals. If managing your finances on your own is getting overwhelming, you might seek out a financial advisor for debt help. While financial advisors may be more often associated with services like wealth management, retirement planning or college planning, they can also help you create a strategy for debt repayment. If you think you may need professional advice related to managing debt, it’s helpful to understand what a financial advisor can do for you.

SmartAsset’s free tool can match you with up to three advisors who serve your area. Speak with your financial advisor matches today.

What Financial Advisors Do

Financial advisors offer a wide range of services designed to help individuals make informed decisions about their money. They assist with creating comprehensive financial plans, which may include budgeting, saving for retirement, managing investments, and planning for major life events such as buying a home or funding a child’s education. Financial advisors often tailor their recommendations to align with a client’s goals and risk tolerance, ensuring personalized strategies that fit each person’s unique circumstances.

In addition to long-term planning, financial advisors can also help clients with more immediate concerns, like managing debt or optimizing cash flow. They analyze a client’s current financial health, identify potential challenges, and provide actionable solutions that work toward stability and growth. Financial advisors may also offer specialized advice in areas such as tax efficiency, estate planning, and risk management.

Ultimately, financial advisors aim to support their clients in building a clear path toward financial well-being, addressing both everyday needs and future aspirations through customized, practical guidance.

How a Financial Advisor for Debt Can Help

If you’re considering working with a financial advisor for debt repayment, it’s important to understand what they can (and can’t) do for you. Generally, when it comes to debt, financial advisors may offer advice in three specific areas:

Creating a realistic budget to help you find the money to pay off debt
Evaluating your debts to help you prioritize repayment and potentially save money
Making a long-term plan for paying off what you owe

Together, these things can help you get into a better position financially to tackle your debt. They can help you create a plan that you can stick to for paying down debt if that’s one of your financial goals.

Budgeting and Debt Repayment

First, a financial advisor can help you put together a budget if you don’t have one to determine how much money you actually have for debt repayment. And if you do have a budget in place, your advisor can go over with you line by line to look for opportunities to cut spending so you have more money to pay off debt.

Having a second set of eyes look at your budget can be helpful for pinpointing areas where you may be wasting money that you’ve overlooked. That can go beyond just what you’re spending each month as well.

For example, your advisor may look at your tax situation to see how much you’re withholding from your paychecks. If you typically get a refund each year, they may advise you to adjust your withholding so you have more money in your paychecks each month. You could then use that money to chip away at your debt.

Debt Evaluation

When you have different types of debt you’re trying to repay, a financial advisor can help you determine the best order in which to repay it. They can also help you look for opportunities to make your debt less expensive. Say you have credit card debt, student loans and a car loan, for instance. Your advisor may look at the interest rates you’re paying for all three, then suggest that you focus on paying off the most expensive debts first.

At the same time, they may recommend something like a 0% APR credit card balance transfer or student loan refinancing to reduce your interest rates. By lowering your rates, you can save money on interest and more of your payments will go toward the principal each month. Both could help you get out of debt that much faster.

Long-Term Debt Repayment Planning

Aside from looking at what you can do in the short-term to make your debts more manageable, a financial advisor will also think about how to manage your financial obligations in the long-term.

For example, they may discuss the pros and cons of paying off your mortgage early if that’s a financial goal you’ve considered. Or, they may offer advice on having life insurance to pay off any outstanding debts for your family in case something happens to you.

Financial advisors can also help with managing debt repayment through different life changes, such as getting married, having children or nearing retirement. They can help you create a financial plan that allows you to pay off debt while still being able to save and invest for the future.

Alternatives to Financial Advisors for Debt

There are several alternatives to financial advisors for managing and repaying debt, each offering a different kind of support. Credit counseling agencies, for example, provide specialized help for those struggling with debt. These agencies are often non-profit organizations that assist clients in creating manageable repayment plans and offer budgeting guidance. Credit counselors may also help negotiate with creditors to reduce interest rates or waive fees, which can make monthly payments more affordable.

Another option is debt settlement companies, which focus on negotiating with creditors to reduce the total amount of debt owed. While this may seem appealing, it’s important to be cautious—these services can sometimes negatively impact credit scores, and fees can be significant. Researching a company’s reputation and understanding their terms is key before engaging in their services.

For those seeking a more self-driven approach, debt management apps and online resources can be useful. Platforms like budgeting apps or online debt calculators help individuals organize their debts, track payments, and create their own repayment plans. These tools are ideal for those comfortable managing finances independently.

It’s worth noting that alternatives to financial advisors can vary in quality and impact on your credit. Understanding each option thoroughly and considering potential risks can help ensure the right fit for your debt management needs.

Credit Counselor vs. Financial Advisor for Debt Help

If you’re working with a nonprofit credit counselor, it’s possible that any advice you get may be free. A financial advisor, on the other hand, is typically paid a fee for their advice and services. Advisors can be fee-based or fee-only. Fee-based advisors are paid commissions based on products and services they recommend; fee-only advisors are paid for the advice they offer.

Next, credit counselors limit the advice they give to debt management and budgeting. They can tell you how to make a budget and a plan for paying off debt. But if you also want advice on estate planning, insurance, taxes or retirement, a financial advisor is better equipped to help.

Credit counselors and debt management companies may be able to do one thing that a financial advisor can’t, and that’s to negotiate debts on your behalf. If you’re trying to consolidate debts through a debt management program, for instance, a credit counselor could act as a go-between for you and your creditors.

Whether you should use a credit counselor or financial advisor for debt help depends on your needs and budget. If you’re comfortable paying a fee for professional debt advice and you also want help with more than just tackling student loans or credit cards, a financial advisor could be the better choice.

Bottom Line

Financial advisors can offer a variety of services, including help with debt. They can offer advice beyond what you may get from a credit counselor or debt management company. If you’ve tried to make a dent in your debt but haven’t made much progress, seeking out a financial advisor could be worth your time and money. Be sure to ask if the advisor could help you negotiate with lenders for better terms.

Tips for Financial Planning

Building an emergency fund is often a foundational component of a financial plan. Maintain an emergency fund with enough money to cover between three and six months worth of living expenses. An emergency fund should be liquid – in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
Some financial advisors specialize in the field of financial planning, helping clients prepare for retirement, manage their investments, save for their children’s educations and more. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.