Credit counseling Service Or Debt Settlement Program – Which Should You Choose?

If you have debts and want to dump it, you are faced with the option of going for a credit counseling service or joining a debt settlement program. Before you are taking both options as the same, you’ve got to know that though they help you get rid of your debt, they are very different. A credit counseling service gives you the correct direction and options to eliminate your dues.

The major difference of debt settlement vs a credit analysis service is that it lets you settle your outstanding balance for a smaller amount. Let’s say you owe your credit card company $3000. You can settle this amount if you pay your Mastercard company $2000 totally.

Debt settlement is easy to avail of. You have to go to a debt settlement company and ask for their assistance. A debt settlement program works by requiring you to make payments to the debt settlement company. The debt settlement company will then pool your money into a settlement fund. Once your settlement fund reaches a big amount of cash, the debt settlement company negotiates for a reduced balance payment from your lender.

Debt settlement is something each debtor wishes to avail of because it seems too good to be true. However, you need to know some things about the program before you join one.

It is a fact that debt settlement can affect your credit standing in a negative way. As much as creditors wish to accept standard payments from you, they don’t give this option frequently. They will usually need you to pay your dues in full which naturally, you can’t afford to do. Thus, you are left with no choice but to stop paying immediately to your creditors and wait for your settlement fund to reach a specific quantity which you may use to pay your dues.

However, if you do this, your account will continue to be overdue. And take note, your payment history makes 35% of your credit history so you would like to keep it current as much as humanly possible. With your account overdue, expect to get harassing collection calls and demand letters from your lenders as their collection practices will not stop even if you enter a debt settlement program. Much worse, you can even get sued for missing your payments.

And even if you have made a bargain by paying less than what you owe, the difference between your balance and the payment made is taxable by the IRS. Don’t forget to consult your tax counsel about this. Yet notwithstanding all this, debt settlement can still be a good option in certain eventualities. For instance, debt settlement can be a choice for folk whose credit standing has been severely damaged already. If your credit standing can still be rescued, look for other options to eliminate your dues.

A credit support service helps you eliminate your debts by lowering rates and dumping overlimit costs. It also barters for the extension of your repayment terms. And though you continue to make regular payments to the credit analysis service, these payments are immediately paid to your lenders to preserve your credit standing.

Whether you go for a credit analysis service or a debt settlement program, the choice remains on your current fiscal situation. Don’t make hasty decisions. Get into a consultation with your finance counsellor so that you avoid ending up in a deeper financial dump.