Credit counseling or debt settlement - which option is best for you?
Learn the benefits, pros and cons of credit counseling vs debt settlement to help you decide which service is best for you.
Credit Counseling vs Debt Settlement
Both programs offer consumers a way to repay their unsecured debt. To decide which program is best for you, apply for both and review each one's plan specifically designed for your unique circumstances.
Credit counseling and debt settlement
Consumer credit counseling
(also called debt management):
Your debt is combined into one lower monthly payment to make it easier for you to meet your financial obligations.
Debt Settlement (also called debt negotiation):
The principal balance of your debt is negotiated to reduce the balance owed and get you out of debt faster.
What is Credit Counseling
A process where a third party negotiates with creditors and establishes a payment plan on behalf of the debtor. The fact that a person is in credit counseling may be reported to the credit bureaus and listed on the credit report. Credit Counseling; however, is more preferred by creditors than debt settlement, and it can help improve or lessen the damage to your credit score.
What is debt settlement
Debt Settlement, or debt negotiation, is the act of contacting your creditors and negotiating a reduced payoff of your debt. It is not uncommon to pay 50% or less of the principal on your debt as settlement in full. This will save you more money in interest and principal payments than any debt relief program outside of bankruptcy. You should keep in mind, however, that some creditors will likely report your settlement to the major credit bureaus. However, when trying to get out of debt and to protect your credit as much as possible, debt settlement can be the most economical option for you.
Don't know which debt program is best for you? Compare credit counseling vs debt settlement to help you decide which one offers the best benefits for your situation.
Whether you choose a credit counseling agency or a debt settlement company, either program can only help you with unsecured debt. Find out what types of unsecured debt qualify.
Search our free credit help resources and apply for financial services. The credit crisis may have prompted stricter credit card company and loan lender approval standards, but poor credit people can still find bad credit financing.
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