Ways to Get Out of Credit Card Debt: Credit Counseling vs. Debt Settlement

When consumers start looking for ways to get out of debt, they come across a number of debt relief options. Credit counseling and debt negotiation are two more types of debt relief methods. These methods have different ways of giving relief to their clients. Understanding the basic principles of operation of these two methods helps to choose the right option.

Credit Counseling:

This service helps the debtor to create a payment plan that suits their financial conditions. The counselors educate their clients on how credit card debt mounts and share tips on how to avoid it. This is usually the step to enroll in the debt management plan. Credit counseling itself does not have a negative impact on your credit report, but when you start the debt management plan it does have some negative points on your credit report.

Credit counselors charge monthly fees to their clients. They help the client to open a new account in which they save a certain amount each month that is later used to pay off the debts.

Debt payment:

This is a debt relief method that helps the debtor reduce the total amount of debt. The creditor and the debtor agree on a reduced amount to be paid as a full payment. This is done in exchange for an initial payment of a certain amount of money. A debtor can expect their total balance to be reduced by at least 40% to 60%.

The procedure in question is simple, therefore a debtor can negotiate a debt settlement on their own. Therefore, you do not have to incur the cost of hiring professionals. This debt relief process shows up negatively on your credit report. However, it is possible to negotiate with the creditors to remove the note from the debtor’s account upon the liquidation of the account.