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

If you have debt and need to dump it, you are faced with the option of going for a credit support service or joining a debt settlement program. Before you take both options as the same, you have to know that though they help you to get rid of your debt, they are awfully different. A credit analysis service gives you the right direction and options to eliminate your arrears.

The major difference of debt settlement versus a credit support service is that it lets you settle your due balance for a lesser amount. Let's say you owe your ATM card company $ 3000. You can settle this amount if you pay your ATM card company $ 2000 totally.

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

This type of program is something every debtor wishes to avail of because it appears too good to be true. However, you must know some things about the program before you join one.

It is a fact that a settlement can have an effect on your credit standing in a negative way. As much as creditors wish to accept standard payments from you, they do not give this option often. They'll customarily need you to pay your dues in full which of course, you can't afford to do. Therefore, you are left with no choice except to stop paying without delay to your lenders and wait for your settlement fund to reach a certain amount which you can use to pay your dues.

However, if you do this, your account will still be overdue. And take note, your payment history makes 35% of your credit report so you would like to keep it current as much as humanly possible. With your account overdue, expect to get hectoring collection calls and demand letters from your lender 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 made a bargain by paying less than what you owe, the difference between your balance and the payment made is taxable by the IRS. Do not forget to talk to your tax counsel about this. Yet despite all this, debt settlement can still be a good option in certain situations. For example, debt settlement can be an option for folk whose credit standing has been severely damaged already. If your credit standing can still be rescued, look for other possible choices to eliminate your dues.

A credit analysis service helps you eliminate your dues by lowering rates and dumping overlimit costs. It also negotiates for the extension of your repayment terms. And though you make regular payments to the credit analysis service, these payments are instantly paid to your lenders to save your credit standing.

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

Source by Kim L Dodgers

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