Consumers looking for help controlling their debt have many options, including debt negotiation and credit counseling. Understanding the difference between the two can help you choose the service that is best for you.
Identification
According the Federal Trade Commission, credit counseling is a service that helps you create a monthly budget or a program to pay off debt. Debt negotiation is the process of speaking to your credit card companies to lower your balance due for a final pay off. A consumer may choose to do their own debt negotiation or they may consider hiring a debt negotiation firm.
Considerations
A credit counselor will develop a monthly plan with you and set up an account for you to deposit money into each month. The counselor will then distribute the deposit to your creditors.
Do It Yourself
Debt negotiation is something that a consumer can do on their own by calling their creditors and discussing a lower payoff amount. Paying a firm to do debt negotiation for you may be risky because not all credit card companies will work with a debt negotiator.
Credit Score
According to the Better Business Bureau, using the services of a debt negotiation company can damage your credit. A credit counselor offers many different programs that may be able to salvage a credit score while successfully paying off debt.
Fees
Credit counselors charge a monthly fee for their service that is made a part of your monthly installment payment toward paying your other bills. According to the Federal Trade Commission a debt negotiation company will charge a large upfront fee, a monthly installment fee and then a percentage at the end of your program that is supposedly drawn on the amount of money they saved you.
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