|
Debt Settlement And Debt Counseling - There Is A Difference
This is one of the most frequently inquired about components to the entire debt issue. Some want to know which is best and generally this depends totally on your circumstances. Most people considering either are in one of two states of mind; one is trying to figure out how to pay off your debts and the second is just to get some insights about managing your credit and budgeting, through debt consolidation.
In any legitimate credit counseling service you should be able to speak with a counselor who is certified. They will examine your debt and income and discuss with you the various options at your disposal. The decision to go with credit counseling or debt settlement will be yours to make. Never allow yourself to feel pressured into choosing anything. There are those that use the only good for today tactic. This should alert you that this company may not be in your best interest.
Debt Management
In order for this program to work your creditors have to agree to participate. As far as your credit report is concerned it is likely that the creditor will make them aware of your enrollment into the debt consolidation program. According to the creator of the FICO credit this should not have an effect on your credit. What will affect your scores is if you have a history of late or missed payments. The scores are also damaged by charge offs, court filings and of course bankruptcy.
After you have completed a debt consolidation period your credit report will be cleared of the notation. How this relates to future credit request is largely subjective. Some lenders will take a negative view of the fact that you enlisted help paying your debts and others will see it as a sign of a responsible person it all depends on the representative reviewing your request.
Debt Settlement
If you choose debt settlement this is an entirely different ball game. The usual approach is to tel you to stop paying your creditors anything. The debt has to have been over due for a certain amount of time before they can even think about negotiating a settlement. During this time you are required to make regular payments into an escrow account. When the funds in this account reach a certain level the debt counselor opens negotiations with a creditor. If the terms can be reached the debt is paid. Generally they try to get fees and penalties removed and even knock a little off the principle, or they get the entire amount renegotiated at a lower interest rate. The companies often settle in this fashion they take a loss but it is generally a lot less than what they would lose paying for attorney’s to sue for that amount. Once the particular debt is paid it is reported to the credit bureau as settled with a zero balance. This is done with each creditor until all of them have been settled. Saving the money for each one takes time and the process can go on for a number of years.
|
