Not all debt relief options are going to be right for you and you need to know the pros and cons of each one, especially since they are based on your situation. Once you have taken the time to do that, it is best to look at 2 different options to get the best comparison. Debt settlement and credit counseling will often be the last two options that a person would compare, so that can help you to find each of the disadvantages and advantages.
Do Credit Counseling and Debt Settlement Have Anything in Common?
When compared to solutions like bankruptcy, credit counseling and debt settlement don’t force creditors. Bankruptcy forces your creditors to write off your debt if you complete all requirements during the filing period and discharge period. This means that your creditors will write off a lot more than normal. The same applies to a consumer proposal. There are some creditors that may not want to go through with it but will accept it if they are the minority that are not accepting the proposal.
Credit counseling and debt settlement don’t force the creditors into anything, and they normally will not impact your credit score like the others. Both consumer proposal and bankruptcy will be recorded on your credit score for many years unlike credit counseling and debt settlements, which makes long term financial impacts more drastic but not as bad on your credit.
Differences between Debt Settlement and Credit Counseling
The first difference is the amount of money that you are going to save under these solutions. Even though you are going to save money on interest payments through credit counseling, however the saves are not as much as it would be with debt settlement. Whenever you qualify for debt settlement, your principal amount is reduced which means more savings over time, even if the interest rate doesn’t change.
Debt settlement reduces the principal and it is best for those who owe more than $10,000. Whenever you owe a lot of money and you want to pay it off in a reasonable amount of time, getting that principal lowered will help out a lot. Reduced interest charges, which is done through credit counseling, will help, but because of the high principal amount, the savings that you get each month may not be a lot.
If you owe less than $10,000 and have a bit of trouble with budgeting and anything else that comes with financial management, then credit counseling is best. You will get education with credit counseling and it will teach you everything that you need to know in order to get your finances under control. If you make just an average income, then you can manage that debt if all you get is reduced interest payments.
However, with an average income, debts that are over $10,000 can be hard to manage, but having the principal reduced may be needed to get relief.
However, with the savings that come with debt settlement can be a lot, but you also need to consider how either option will affect your credit score and report. Some are going to experience long term effects from credit counseling and then some with have long term effects from debt settlement. Your advisor will be the best one to let you know what option is right for you and help you to see any long-term impacts that may happen.
Although, debt settlement may have more advantages than credit counseling. Based on the amount of debt that you have; a great credit counseling program may leave you paying years and years on your debt before it is paid off. Debt settlement programs will often have you debt free in about 3 years.
Before You Enroll
Whether you decide to go with credit counseling or debt settlement, you need to be sure that you are going to make the best choice for you. Fill out the debt relief form to learn about what options you have and find out which one would be best for you.
get your free savings Estimate