Benefits and drawbacks of debt negotiation vs. credit counseling

Benefits and drawbacks of debt negotiation vs. credit counseling

15 January 2010

If you're caught in the trap of multiple bills and are willing to eliminate your debt fast, then various debt relief programs can be helpful for you. There are programs, like debt consolidation, debt negotiation (debt settlement), credit counseling, etc. Both debt negotiation and credit counseling are effective debt relief programs. But before choosing any one of them, you should compare debt negotiation vs. credit counseling

Debt negotiation vs. credit counseling

Given below is a brief outline of debt negotiation and credit counseling to help you understand them better.

1. Debt negotiation - It is a negotiation between a creditor and the debtor. Negotiation can be done yourself or by taking help from a negotiation company. It can help reduce your monthly payments and lower the interest rates on your debt. Negotiation can also help to eliminate fees or charges that have been accrued, reduce interest rates, and repayment time.
2. Credit counseling - It is a process where you consult with a counseling agency and get advice on managing your money. The counseling agency will find solutions to your current financial problems and develop a plan to help you avoid similar debt problems in the future. They will help you deal with your debt, and will explain how to improve your credit score.

Benefits of debt negotiation vs. credit counseling

In order to compare debt negotiation vs. credit counseling, it is necessary to know their benefits. Given below are the benefits of debt negotiation and credit counseling.

1. Debt negotiation - The benefits of debt negotiation are as follows:
   
   • Reduction in total amount owed
   • It can be an alternative to filing bankruptcy
   • No harassing collection calls
2. Credit counseling - Credit counseling has many benefits.
   
   • Some of them are given below.
   • You can learn money management skills
     You can avoid filing bankruptcy

Drawbacks of debt negotiation vs. credit counseling

1. Debt negotiation - Negotiation comes along with some risks which should be taken care of.
   
   • Negative affect on credit score
   • High fees payable to negotiation company
   • You can be defrauded by negotiation company
2. Credit counseling - Counseling has few drawbacks, which are given below.
   
   • Damages credit report
   • High counseling fees
   • Programs are lengthy

There are many debt negotiation and credit counseling companies which can help you to eliminate debt and avoid bankruptcy. When you compare debt negotiation vs. credit counseling, you can decide which one serves your purpose better. But before choosing any of the programs, it is very important to prepare a budget so that you can make payments on time.

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