Debt Settlement Vs Credit Counseling

If you are having trouble making payments on your debts, then it's time for you to look for debt relief. Two options for debt relief more common for people in debt are debt settlement and consumer credit counseling. However, many people are confused when it comes to choosing between these options. It is worth mentioning that the choice of debt settlement or credit counseling will depend on the debt situation. We will discuss in detail.

What is debt?

In a process of debt settlement, negotiate with your creditors to reduce the principal balance. You have to pay a lump sum payment to creditors in return. Note that your creditor is not even considered for the solution to your debt if you have not failed to repay the loan.

Why should you pay off your debt?

That could save money with a successful solution. Most borrowers save 50% or even more, especially when hiring professional services.

Since you need to make payments on one or a few creditors, to be debt free relatively quickly. In fact, the process of settling your debt is a faster process than the consolidation of debt and even bankruptcy.

Disadvantages of debt settlement

The problem with debt is the solution that can significantly reduce your credit score. Of course, you can rebuild your credit over a period of time. In addition, creditors may sue in the process of liquidation. All settlement companies advise you to stop paying creditors so that creditors agree to negotiate the debt. In this situation, creditors may sue you (although most lenders do not).

Understand consumer credit counseling

If you are not too comfortable with your current payment plan, you can approach a credit counselor to negotiate a better payment plan on their behalf. The agency will negotiate interest rates and monthly payments to lenders. Also known as debt counseling.

Pros and Cons of Consumer Credit Counseling

One good thing about credit counseling is not going to lower your credit score. However, the debt counseling will not help you if you are looking for a quick fix. Counseling services essentially extends the repayment period to reduce monthly payments.
What is the right choice for you?

With debt, you save lots of money. If you opt for debt counseling, you will end up paying more than your original debt. But debt advisers may be a better option if your debt situation is not serious. This is because it will not affect your credit rating. If you are immersed in the debt settlement is the right choice.