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Clients often express how the shame associated with being in debt held them back from seeking help sooner, which is why the anonymity of online options for support appeals to those feeling embarrassed and overwhelmed about their financial situation.

But whether you’re looking for help with debt, investing or budgeting, evaluating the reliability of online information is crucial. Due to the proliferation of AI and its addition to social-media platforms, online searches for help curate results based on publicly available information.

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However, problems arise when the generative language AI chatbots — such as OpenAI OpCo LLC’s ChatGPT, Microsoft Corp.’s Copilot, or Meta Platforms Inc.’s AI — deliver what looks like sound advice, but it’s either incorrect, incomplete or not in someone’s best interests.

If you aren’t familiar enough with the topic to discern what helps from what hurts, the answers can steer you in the wrong direction. With that in mind, here are three tips to help you differentiate between good advice about dealing with your debts and bad advice that could steer you in the wrong direction.

There are no quick fixes

Advice that suggests quick fixes for your debt problems is worth taking with a big grain of salt because there are no quick fixes for debt. It took time to get into debt and, with interest and fees tacked on, it will take at least that long to get out of debt.

Some debt consultants promise to get negative information removed from your credit report, but that isn’t how the credit reporting system works. Negative but accurate information remains on your credit report for six to seven years. Signing up for a high-interest loan to simply improve your credit rating usually comes with restrictive terms or conditions and doesn’t deal with your existing debts.

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Debt is the result of financial habits, and it takes time to change your habits. Focus on responsible financial practices, budgeting and systematic debt repayment. The proactive steps you take will start to reflect positively on your credit report, so rather than paying someone to “repair” your credit, you can do it yourself for free.

Misguided advice about repaying debt without money

It’s not unusual for those with the tightest budgets to be extra leery about asking an expert for help. But it’s also a bad time to rely exclusively on AI’s guidance, because depending on someone’s overall situation, the information provided by a chatbot can be drastically incomplete.

The reason is simple: an overwhelming amount of online information is dedicated to debt-repayment options. This signals to AI that it should highlight repayment options over what to do when you have no ability to make any payments.

In general, most people want to honour their obligations. When someone asks a chatbot how to pay off debt without using money, the usual suggestions — prioritizing essentials, creating a bare-bones budget, seeking financial assistance or finding additional income — are likely options they’ve already considered.

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Because AI can’t fully grasp the nuances of human emotion, it can’t appreciate how getting a second job could impact family dynamics and daycare expenses, that someone had no choice but to utilize community services when they couldn’t afford groceries, or that a person’s mental health could suffer if they’re working too much.

AI chatbots may inadvertently guide individuals with income and assets towards unintended legal consequences by advising them to contact their creditors and explain their hardship. For example, this could prompt a lender to mitigate their risk by capping the limit or increasing the interest rate on a home equity line of credit. It could also mean that your assets, such as a vehicle, might be at risk if you aren’t able to make the payments.

AI lacks the understanding that when there isn’t enough money to make payments, a generic suggestion to plug away at a debt-repayment strategy is insufficient advice.

Debt consolidation isn’t always right

Debt consolidation can be helpful and is often touted as good advice, but it’s not the right solution for everyone. There are different types of consolidation — for some, you borrow more money; for others, you use money already in your budget or pay a reduced amount — but whether it works for you comes down to the question of how you’re addressing the root cause of your debt.

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If your debt is due to your spending habits and living without a realistic budget, consolidating your debts could put you deeper into debt.

An AI model isn’t able to discern how you feel about adhering to a budget that reduces discretionary spending in favour of making significant debt payments; whether you and your partner fundamentally disagree about spending choices; or that you plan to buy a home in the next few years and need to choose a consolidation option that quickly helps you rebuild your credit rating.

Although AI models cannot understand your emotions related to adhering to a budget that prioritizes debt repayment over discretionary spending, disagreements with a partner over expenses or specific financial goals, they can assist in changing money behaviours.

For example, expense-tracking apps suggest limits for different categories, while budget-generating apps reveal behaviour patterns you may not have spotted yourself. Chatbots can also prompt you with feedback to help you stay accountable to your goals.

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Taking the first step can be the hardest when you need help with your finances. AI offers impressive features, but much like a high-tech car not yet able to drive itself, effective money and debt management still relies on human intervention to create practical, long-term financial stability.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 27 years.

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