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Debt Negotiation Vs Credit Counseling

Two of the most common options to help you deal with debt problems include debt negotiation and credit counseling. Today we compare debt negotiation vs credit counseling and discover why one option may be better for you than the other. Both options are designed to help you get your credit card debt under control.

First let’s take a look at debt negotiation.

Debt negotiation is the American way. You can haggle with your creditors and work out an agreement that both of you aren’t 100% satisfied with but will accept to reach a compromise on your accounts. You use debt negotiation when you are having trouble keeping up with your minimum payments. You can ask for a longer payment period, a reduction in the minimum monthly payment required, a lower interest rate, or even possibly a reduction in the principal balance.

The best benefit of debt negotiation is you can negotiate one lump sum payment to wipe out your entire balance in one fell swoop. This is also known as a debt settlement.

The disadvantage of credit card negotiation is that your creditors will usually not be willing to negotiate with you unless you are behind on your payments which has a very negative effect on your credit score. However, this lower credit score can be overcome in a short period of time once you have no more credit card debt and can make all your payments on time in the future. One last benefit of debt negotiation is you can learn to do it yourself. Your creditors would actually prefer you did it this way instead of hiring a third-party debt negotiation company.

Now let’s take a look at credit counseling.

Credit counseling is when you contact a credit counselor who will work with all your creditors and get them to accept a lower monthly payment stretched out over a longer period of time.

It is similar to debt consolidation.

You make just one monthly payment to the credit counseling service and they distribute that amongst all your creditors.

A credit counselor will also work to cease debt collection calls and get you a lower interest rate. You may have to pay a small monthly fee of $25-$50 to the service for the administration of your account. The benefit of credit counseling is your credit score is not as damaged as with debt settlement and negotiation.

One of the disadvantages is your principal is not reduced.

Another disadvantage of credit counseling is the prevalence of fraudulent companies in the industry. You have to do your due diligence and make sure he you are working with a legit company before you send them any money.

This is not a concern with do-it-yourself negotiation.

When you compare debt negotiation vs credit counseling you can see that each auction has its merits. While debt negotiation may be the solution for you, credit counseling may be a better option for someone else. Each consumer situation is unique and there is no one-size-fits-all debt solution that will work for everyone.

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