Credit Counseling Vs Debt Settlement
When trying to avoid bankruptcy and still handle your debt, people often compare Consumer Credit Counseling (also known as CCCS) and Debt Settlement. Consumer Credit Counseling looks appealing to many people because they usually have a local office where you can sit down face to face with someone. They also usually tout themselves as being non-profit.
Credit Counseling and Debt Settlement are two very different programs. In Credit Counseling, the interest rates on your accounts will be negotiated, usually down to around 10%. Usually, your accounts will also be closed. This means you will pay back approximately 110% of what you owe. Credit counseling will also leave what is called a third party fingerprint on your credit report. So while your credit score may not go down during the program, lenders will see that you had to have assistance in paying off your debts, which may make obtaining financing more difficult.
In Debt Settlement, you will pay back 40-50% of what you owe plus fees, which are generally 15% of your debt amount. This means you will pay back 55-65% of your total debt amount. Your accounts will show as behind while you are on the program (which is why debt settlement is great for accounts that are already behind or in collections) and your credit score will be negatively affected. When you finish the program, your accounts will show as settled with a zero balance. To lenders, it will look like you fell behind but then were able to pay off your creditors in full BY YOURSELF!
There are many other pluses and minuses to each program. You sure be sure to ask if there are late payment fees, etc. Generally, debt settlement programs are much more flexible than counseling programs, allowing you to reduce or skip payments with no charge. Again, be sure to shop around and get all the details before signing.
Debt Settlement | Consumer Credit Counseling, Debt Settlement