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| Credit Card Debt Solutions 2010 - Debt Settlement Vs. Consumer Credit Counseling |
| By Diana Roberts - Sep 10, 2010 12:40 PM ET |
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| President Barack Obama makes opening remarks during a news conference in the White House in Washington. |
Often, people hear differing stories from friends and relatives who have tried
various popular debt relief solutions to resolve their credit card debt. While
one option may have worked for one person, it may not be a good solution for
others. It is important to understand that when it comes to eliminating
unsecured credit card debt, consumers need to choose a strategy based on their
individual situations. Picking the right debt relief strategy could knock years
or thousands of dollars off of debt repayment. Picking the wrong one could have
the opposite effect.
Credit counseling and debt settlement are two debt relief options that many
consumers frequently group together. While they do have some aspects in common,
they actually resolve credit card debt very differently. Before choosing one or
the other, consumers should understand the basics of each, including who
benefits most from each solution, how the process works and the advantages and
disadvantages of each.
First, let’s discuss credit counseling. Before choosing a credit counselor or
counseling agency, consumers will want to do their research. Like any business,
there are good and bad counseling programs, and finding a legitimate company is
the first step in getting the best deal on debt repayment.
Credit Counseling 
Who should use it:
- Consumers with unmanageable credit card debt
- Consumers with multiple card debts or loans
- Consumers who don’t want to negotiate with creditors
- Consumers with bad spending habits or financial behaviors
How it works:
Credit counseling is a good debt relief option for consumers who have trouble
paying off debts because they are dealing with many creditors and because they
lack discipline in spending habits. These counseling programs do exactly that;
they counsel clients on how to better manage their debts and implement better
financial practices such as budgeting and not overspending. The counselors will
help deal with their clients creditors to develop a repayment plan and lower
interest and fees that could be keeping them in debt longer. It’s crucial to
note that credit counseling agencies do not negotiate their clients’ debts, only
fees and interest rates. So for those that don’t fit into most of the categories
above, this may not be a good debt strategy.
Advantages/Disadvantages:
One advantage of credit counseling programs is that clients only have to make
one monthly payment for all of their debt. The agency will disperse this payment
to creditors on the client’s behalf and deal with creditors so their clients
don’t have too. The counselor will also likely negotiate lower interest rates,
extend loan terms and eliminate card fees for clients to help them pay back debt
faster. The downside of going through a credit counseling program is that many
of their services are ones consumers can do themselves. For consumers who feel
they can take the initiative to work with creditors on their own, do-it-yourself
credit counseling may be just as effective as going through a professional
agency.
Another option for credit card debt solutions is debt settlement. Like credit
counseling, consumers will want to find
legitimate
debt settlement companies or firm before committing to a program. There is
also the option of do-it-yourself debt settlement. But for now, let’s focus on
professional debt settlement programs.
Debt Settlement
Who should use it:
- Consumers with $10,000 or more in debt
- Consumers who want to reduce their debt balance
- Consumers who want to pay of debt quickly
- Consumers who are on the verge of bankruptcy
- Consumers who want to avoid future bankruptcy
How it works:
Debt settlement firms will negotiate a client’s total debt by working with his
or her creditors to agree on a reduce lump sum repayment. Creditors will often
agree to reduce the borrower’s debt by 40 to 60 percent, meaning debt settlement
clients often pay back much less than their original credit card balances. The
consumer must then pay back this new, reduced balance in a time frame agreed
upon by the agency and creditors.
Advantages/Disadvantages:
Legitimate
debt settlement programs can shave significant time and money off of debt
repayment. Because the consumer pays back less money, they can pay back
creditors faster and in a time frame that is much more manageable. For clients
with $10,000 or more in debt, this can mean saving thousands of dollars and
getting back on the road to living debt free in just a few years. One downside
is that some consumers may not qualify for a debt settlement program if their
debt is under a certain minimum amount. Many debt settlement companies require a
minimum debt balance for eligibility into their programs. However, this amount
varies from company to company, so it is important for consumers to do research
to find a program that works for them.
Debt settlement is a legitimate alternative to filing bankruptcy however it is
not the only debt relief option available. Check out the following link to speak
with a certified debt relief specialist who will go over all your options for
free:
Free Debt
Relief Advice
To contact the reporter on this story: Diana Roberts in Los Angeles at droberts1@debtupdate.org
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| (10 of 177) |
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| Diane says: 11:33 AM Tuesday, September 21, 2010 |
| Thank you for providing me this service, it allowed me to pay off all my debts. I'm getting married in 2 weeks and I'm doing it debt free! |
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| Michelle says: 12:53 PM Tuesday, September 21, 2010 |
| Hi, just found this site and read your story. I'm so pumped to get rid of this debt that's been dragging me down. |
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| Jen says: 1:15 AM Tuesday, September 21, 2010 |
| I saw this on CNN a while ago and missed the website address. Glad I came accross this again. Honestly, this is unbelievable, all I have to say is WOW. |
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| Stephen says: 1:43 AM Tuesday, September 21, 2010 |
| I wish I'd known about this before I applied for bankrutpcy! I would have saved a heck of a lot of hardships. |
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| Julia says: 2:03 AM Tuesday, September 21, 2010 |
| Yay! glad to see it's helped and that my story is getting out there! good luck! |
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| Davis says: 2:12 AM Tuesday, September 21, 2010 |
| My mom just e-mailed me this, a friend at work had told her about it. i guess it works really well |
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| Damo says: 2:24 AM Tuesday, September 21, 2010 |
| I saw this on the news. How lucky Linda is to have found this opportunity!?!?! Thank you for sharing this tip! |
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| Amy says: 3:56 AM Tuesday, September 21, 2010 |
| I was one step away from living on the streets. I now live in my own house and have no monthly debt payments. |
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| James says: 4:06 AM Tuesday, September 21, 2010 |
| wasn't sure about believing this but I didn't want to miss out and filled out the form.. so glad I did. Looking forward to my new life. |
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| Wanda says: 05:21 AM Tuesday, September 21, 2010 |
| I am really at my wits end with feeling poor and out of control. I thought I couldn't do it anymore, but this sounds like it could be worthwhile |
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