Difference between Credit Counselling and Debt Settlement

| October 12, 2013
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Even though both of these services offer you help to settle your loans, there are a lot of things that sets these two apart. Credit counselors are non- profit organizations that help you manage your money whereas a debt settlement company is a for-profit organization that deals with your debts. So basically these companies offer you a hand if you are having any sort of trouble regarding your money and debts.

A Credit counselling organization offers you help to manage your money and debts. It also supports you in developing a budget in a way that may assist you paying off your debts. Their counselling workshops are held to discuss your financial state with you and help you develop a budget plan that may be for your good. An initial counselling session is held for about an hour where you are offered more session to take in the future. Most of these counselors belong to a non-profit organization but sometimes they charge a fee for their help, that may be taken out from the payments you make to them.

When you decide to consult a debt settlement company to help you out in paying off your debts, some creditors and debt collectors go against your plans and do not agree to the settlement. They try to make things even more difficult by going for a lawsuit against you. This is when your debt settlement company would ask you to stop paying the debts, hence leading you to late fee penalty. This way your charges and fees start growing even bigger. So the key difference between these two types of organizations would be that credit counsellors seek up-front agreements with your creditors whereas debt settlement groups have no such plans lined up for you. Know your necessities and don’t purchase the extravagances now – You may as well use your cash just in purchasing the necessities. This will prevent you from acquiring obligation.

Most individuals use cash in obtaining their extravagances separated from the requirements. Provided that you are doing the same tangle, then there is a probability that you’ll acquire obligation as well. In that capacity, before it gets past the point of no return, know your necessities and don’t purchase extravagances now. Thusly, you can administer your accounts and won’t fall into obligation.

Where credit counselors offer advice and organize a debt management plan for your, debt settlement differs totally by arranging a way to settle your debts with the creditors. They try to pay off your in lump sum amounts that are less than the money you actually borrowed. For example, if a creditor agrees to forgive a certain amount of your debt, the debt settlement company charges a small amount of fee from that amount. This is how the debt settlement service works.

Debt settlement has its downfall as well, where it gets you a negative credit score, which would stop you from getting financial assistance, like loans in the future for as long as seven years. Credit counselling is considered a very safe option if your debts are not too huge. There are not many known drawbacks which should stop you from going for this service.


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Category: Debt

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