Comparing Debt Settlement And Credit Counseling

By Author: unknownmem
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1. How much is your budget? The primary intention of a credit counseling process is to help you to get into a debt management plan and a majority of credit counselors who do not run their agencies to profit are there to help the consumers about all their debt issues. However, the consumers are supposed to donate a small amount for the services acquired from the credit counselors. It is clear therefore that securing the services of credit counselors may not be cost effective rather it can be more expensive in the long run. However, if you are considering approaching the debt settlement process to get respite from the agony of debts, you will also have to keep in mind the monetary risks that are associated with this process. In other words, the process of debt settlement is also not devoid of disadvantages because as soon as you enroll for this program, the payments that you were making to the creditors till now may stop suddenly and they may start harassing you for nonpayment of debts. Although, some of the debt settlement agencies may charge you with irrational fees, credit counseling is still the costlier route.
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... Will your credit rating get affected? According to the opinion of credit counselors, the process of credit counseling or the debt management programs are not supposed to affect your credit rating. While this is true to a certain extent, the fact that you have consulted the credit counselors will certainly show on your credit report. On the other hand, the debt settlement process will affect your credit rating because in this program, you are not supposed to make the payments to the creditors instead accumulate funds to be paid together. Therefore, if you are too concerned about your credit rating, you should choose the credit counseling program.
3. Types of debt that you have – The creditors who are rigid about debt repayment will not readily agree to settle the debts with you and if you are working with such a creditor, you will perhaps have to consult the credit counselors. On the contrary, the same creditors may not be ready to lessen the rates of interest if you are enrolled for the debt management programs. It is good therefore if the consumer shares all the necessary and relevant financial information with the credit counselors because they are more familiar with the nature of the creditors.
4. Your Personality- Credit counseling may appear simpler to the consumers simply because the extent of uncertainties in debt settlement are more and this program will not be able to provide you with a guarantee that you will actually get respite from the debts according to the plan.
In conclusion, it can be said that credit counseling and debt settlement are compliant with their pros and cons and it is you who will have to decide the process on the basis of the factors stated above and the most important thing that is to be kept in mind is that you should be working with an agency that is legitimate and makes you feel comfortable about resolving your debts.