Debt Settlement vs. Credit Counseling

Debt Settlement vs

Debt Settlement vs. Credit Counseling

If you are troubled with an overwhelming debt crisis and can no longer afford your monthly payments, there are a number of debt relief options you can look forward to.

Out of these Credit Counseling and Debt Settlement are two possible options that you can consider. If you are not entirely sure about the effects, advantages, disadvantages of both, then this article might prove helpful. Here are some basics things that you can consider before you make your final choice:

1.Debt settlement is the process where you ask for debt reduction from your creditors. Here your creditor needs to agree on a reduced balance that will be regarded as full. Credit counseling on the other hand is a planned method of debt relief where you can get education about how to avoid incurring debts and manage your finances better. With a debt management plan and budget which is also a part of counseling programs you can repay your debts easily.

2.Credit counseling programs are expensive than debt settlement programs when you consider the monthly payment. This is because credit counseling services have effects on the interest rates, but debt settlement programs help in reducing your debt up to 40-60%. Debt settlement affects your credit report with negative scores for a few years but you can get over it with a successful settlement program.

3.Credit counseling is similar to debt management. Here you are provided with proper guidance and plans that would help you to pay off your debts on time. With Debt counseling services you can understand which option will resolve your financial crisis. But Debt Settlement is not just based on mere advices. It aims to reduce your debt, interest rates and penalties on your bills so you can become debt free faster.

4.When you are troubled with overwhelming debts due to multiple credit cards balances a credit counseling program can help you regain control of your situation. Your counselors' will contact your creditors and negotiate your debts on your behalf. A credit counseling program will help in reducing the interest rates if you agree to the terms of the plan. Unlike debt settlement your debt amount will not be reduced. But if you are regular with your payments your credit scores will improve.

5.Debt Settlement helps in reducing your total debt amount to nearly 40-60%. The time span required for debt settlement is much less than a credit counseling program. Here you/ settlement attorney negotiate your debts with your creditor in order to reduce your debts. But debt settlement affects your credit report with negative markings which can take some years to resolve. However it is a fast process and works best with lump sum debts.

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