No, a Debt Settlement program and Consumer Credit Counseling is not the same thing. The goal of debt settlement is to eliminate your debt by negotiating with your creditors a one time payment to settle the debt. With debt settlement, the consumer is able to eliminate about 60% of the debt with this type of debt consolidation plan. Consumer Credit Counseling does not try to eliminate debt, instead, Credit Counseling will setup a debt management plan to reduce your interest and lower you monthly payment.
The biggest downside to a debt management plan is the time that it takes too long to get out of debt. Over 70% of all consumers who enroll with a credit counselor cancel their plan before they finish. The Debt Management plan will have a lower payment compared to the minimum payments on your credit cards, but then you have to pay the credit counseling fees and your payment is typically higher than what you are currently paying. The average payment plan takes 5 to 7 years and the interest will continue to accrue on the credit cards the entire time.
Although Credit Counseling Services advertise they can reduce your interest rates, there is no guarantee that the creditor will agree to lowering your interest. When they are able to reduce the interest, it is only for 6 to 9 months and then the rates are raised back to the maximum allowed by law.
When you sign up for a Debt Management Plan, the company then has to put a negative mark on your credit report showing everyone that you had to get Debt Management help. This will remain on your credit report for 7 years after your last payment with the credit counseling service. This mark is looked at by creditors the same way they look at Chapter 13 Bankruptcy.
With Debt Settlement, you are able to set up a payment plan that will consolidate all of your bills and have you debt free within 36 months. Debt Settlement can have you debt free in half the time it takes for a Debt Management plan. Since you accounts are closed out, the interest and fees will also stop.
The advantage to choosing a debt settlement plan is that it will eliminate your debt by 40-60%. Unlike trying to managing your debt, FH Financial targets the problem by negotiating settlements with your creditors that will eliminate the debt problem. This is the most practical way for a consumer to get out of debt with the least amount of consequences.
If you are interested in learning more about the advantages of Debt Settlement over a Credit Counseling program, let a trained professional at FH Financial answer your specific questions. Click here to request a Free Consultation
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