Credit counseling vs Credit card debt negotiation programs which is better for your financial predicament?

Posted on June 26, 2009 @ 4:11 am

Were all aware that we here in the United States are stuck in the middle of a horrible financial collapse.  Needless to say this is causing severe loss to many Americans.  There are an almost a never ending number of foreclosures plus rising levels of unemployment.  To add insult to injury credit card debt is on the rise.  This is leaving millions of people in predicaments with their credit card debt that is very hard to keep up with.  At some point people start considering reaching out and getting some assistance with their debt situations when they come to the realization that there aren’t very many options on the market to help them.  The two most popular of credit card debt reduction programs are consumer credit counseling programs sometimes known as a debt consolidation plan and debt settlement sometimes referred to as credit card debt negotiation.  

Both of these programs do have the ability to help people get out of debt much sooner than if they were to just hang out on the debt treadmill and pay monthly minimum payments.  However these programs are very different.  

A consumer credit counseling program has very lucrative benefits; one being they can normally get the interest rates bumped back down.  Another very nice aspect of this program is that you will make merely one payment a month to the credit counseling agency in which they disperse to your creditors on your behalf; thus making your life much easier in terms of paying monthly bills.  On average a consumer credit card debt counseling program will take anywhere from five to eight years to get out of debt.  

Debt settlement is a much different kind of a process.  For starters you actually reduce your balances not your interest rate.  So you end up saving a lot of money, in most situations the debtor will see a savings of 50% or more from how much they owe the creditors.  Another stark difference from a consumer credit card counseling plan is that you will be debt free much more rapidly with debt settlement, usually no more than four years.  But there is one downfall, in order for the credit card companies to be in position to work out a debt settlement the credit card accounts must go into default; the creditors will never negotiate when you’re up to date with the payments.  So this does have a derogatory effect on the credit report.  

The negatives put to the credit report will not remain there forever and it will go back up towards the end of the credit card debt settlement program.  For the vast majority of people in credit card debt one of the two programs mentioned above will help.  Those folks who have no problem paying their minimum payments on time should go for credit counseling; but those who have a large amount of credit card debt and have a hard time maintaining there payments then debt settlement would be a better suit.

Leave a Reply