Comparing Credit Card Debt Settlement and Credit Counseling

By [http://ezinearticles.com/?expert=Hector_Milla]Hector Milla

Credit counseling and credit card debt settlement are the most common types of debt relief. While many consumers know about these methods, most do not know the difference between the two, what they offer, or the price for utilizing each service.

Credit counseling, which is also known as debt counseling, is designed to help the consumer reduce their interest rate, lower their payments, and keep all accounts in a current status. Lump sum monthly payments are made to the agency you are working with, which is then dispersed between creditors. Individuals who seek credit counseling can get out of debt much quicker than if they continue to make minimum payments. The fixed payment is easy to manage, since there are no changes in the due date or the amount due. The average credit counseling agreement can last as long as five years, determined on a case-by-case basis.

Debt settlement involves reducing the overall balance rather than reducing the interest rate. Unlike credit counseling, all accounts must be in default before a settlement counselor can negotiate a lower balance.

In the case of debt settlement, consumers can save a significant amount of money, since the credit card companies often agree to accept � to � of the original balance. Naturally, paying less money means quick debt relief. The average settlement plan lasts for one to two years.

While credit counseling allows the consumer to keep all accounts in the positive, participating in a settlement plan can temporarily affect one's credit score during the negotiations process.

Perhaps the primary difference between credit counseling and debt settlement is the savings. In credit counseling, consumers will still pay back the full amount that is due. After all, the interest is not removed, only reduced. On the other hand, settlement saves 40-60% of the balance, which is a major difference.

Other differences between the two programs should be considered as well. Consumers get out of debt quicker when they take advantage of settlement plans, but may have a few temporary negative remarks placed on their credit bureau report. These remarks are easy to remove once the negotiations process has been completed. In counseling for example, all accounts are reported as current, whereas in a settlement plan they remain past due for a short period of time. A few collection calls may be received while participating in either program.

In both cases, consumers can expect to pay a fee for participating in the service.

NOTE: by researching and comparing the best [http://www.creditcarddebtsettlementusa.com]credit card debt settlement services in the market, you will determine the one meeting your specific financial situation. Specialized advise from a reputable debt counselor is always suggested.


Hector Milla runs the [http://www.creditcarddebtfree.org]Credit Card Debt Free website - where you can see his best rated credit card debt settlement and debt consolidation service.

Article Source: [http://EzineArticles.com/?Comparing-Credit-Card-Debt-Settlement-and-Credit-Counseling&id=3766140] Comparing Credit Card Debt Settlement and Credit Counseling