Financial Information
Can you explain the difference between a Credit Card Debt Relief program and Credit Counseling?
Question : Can you explain the difference between a Credit Card Debt Relief program and Credit Counseling?
I’m trying to figure out which route to take with my financial situation. Are there any other options for a person who is still current with all payments but on the verge of possible financial ruin?
debt relief counseling
Best answer:
Answer by Common Sense
The former is a scam. The latter IF done by your local Consumer Credit Counseling Service (CCCS) is a good idea. Anyone other”counseling service” is probably a scam.
With Credit counseling, the credit counseling company works with your creditors to have your interest rates lowered so you can pay off your debt faster. You normally will make one payment to the company and they will distribute it to all your creditors. Usually takes 4-7 years to become debt free.
The Negative to credit counseling is that while your credit score itself will usually not be negatively effected by enrolling in a credit counseling program, your ability to establish new credit, or any use of existing credit for that matter, will be abolished. Throughout the duration of the program, it is unlikely that you will be able to qualify for a home loan, car loan, or any other credit.it is hard to get a loan or credit card during this period. Also, although interest rates are usually (but not always) lowered for consumers in credit counseling programs, the monthly payments typically will stay the same as your minimum payments, and sometimes more. That means, for consumers that are truly struggling or unable to make their minimum monthly credit card payments, this option will not provide cash flow relief.
With Debt Relief, the debt settlement company can help people that are truly struggling with credit card debt, by representing them in negotiations with creditors to secure settlements of anywhere between 40-60% of the amount of debt owed (at time of enrollment). Of the debt relief options, debt settlement is the least expensive, and shortest in length, with most debt settlement programs averaging between 24-48 months in length.
The Negatives to debt relief include negative marks on your credit for up to seven years. Also, most creditors will report the forgiven debt as income and will send you a 1099c form. You have to report this as additional income on your taxes which would increase the amount of taxes you owe on your tax return.
Here is an article that can help you in your search. It is a review of a company I personally used. I was in a simillar situation as you and they where able to help me pay off my debt in 2 years. My credit rating actually went from the mid 500s to a 680. My debt to income ratio was reduced to nearly nothing which was the main reason for the increase, but they also assisted in removing negative marks on my credit and unlike debt consolidation, or debt settlement, I don’t have to worry about any negative marks following me around for the next 7 years. Thanks to them, I was able to get a loan for a home (just in time before the $ 8000 tax credit ended…phew).
Good Luck!!