Debt can be overwhelming but has positive ways of gaining control over your financial situation. The two options widely favored are debt relief and credit counseling, each of which, depending on your needs, carries advantages. From recommendations by specialists at CBS MoneyWatch, here is a comparison of the two practices and a guide on what might suit you.
1. What Is Credit Counseling?
Credit counseling is often performed by not-for-profit companies. It encompasses money management and financial education so that you are able to transform your money managing behavior.
Major Features:
The credit counselors will help you in budgeting, prioritization, and avoiding new debt. They can also provide you with debt management plans (DMPs), which lump your debts together into a payment with less interest.
Who It’s For
Credit counseling is most effective for those with modest debt levels and who wish to organize their finances and prevent future money problems.
2. What Is Debt Relief?
Debt relief programs like debt consolidation and debt settlement handle debt issues more aggressively.
Debt relief firms do it for you, negotiating between you and your creditors to decrease the amount you owe. Debtors in debt settlement programs have debts lowered by 32%, as stated by the American Association of Debt Resolution.
Who It’s For:
Debt relief is ideal for those who owe enormous debts that you cannot personally settle. It offers instant answers to debt burden reduction.
3. How Credit Counseling and Debt Relief Coexist
Credit counseling and debt relief have different functions, but they can be used together.
Blending Approaches:
Credit counseling can give you the basics and tools to get your finances in line, and debt relief takes care of bigger, more pressing debt problems.
Master Plan:
By using both services, you can treat both the cause and symptoms of debt, giving you a more comprehensive overall financial recovery plan.
4. Things to Keep in Mind
When choosing between debt relief and credit counseling, keep the following in mind:
Fees:
Credit counseling doesn’t cost much or is even free, whereas debt relief services can charge you. Research how much each costs.
Credit Effect:
Debt relief, specifically debt settlement, will negatively impact your credit rating. Credit counseling doesn’t impact your credit at all or has a positive effect.
Tax Ramifications
Settlement of debt is taxable income if you have part of your debt forgiven. Talk with a tax expert about possible effects.
5. The Best Choice for You
Your individual financial situation and goals will be the best choice for you.
Credit Counseling:
Opt for credit counseling if you owe little money and wish to become more familiar with your money and budgeting ability.
Debt Relief:
Select debt relief in extreme debt and need urgent assistance to reduce debts.
6. Professional Advice: Employ Quality Providers
Natalia Brown, DebtsFreeHome, Chief Compliance and Consumer Affairs Officer, emphasizes employing quality providers.
Bright Options:
“Before anyone ever even consider debt settlement, make sure to go through a good company to get the right information and protect your financial future,” cautions Brown.
Research and Feedback
When you select an option of a service, search providers extensively. Search reviews, ratings, and accreditations so that you are working with a good firm.
7. Final Thoughts
Debt does not necessarily have to control your life. Whatever you decide to debt relief or credit counseling or both together, you have to do it for the start towards financial freedom.
In case you are not certain what would be best for you, then you can contact DebtsFreeHome for a free consultation. Their experts will be able to study your situation and come up with a custom strategy to fit your budgetary needs.
Remember that the proper decision is one for your specific situation. When you know your alternatives and have consulted a professional, you can take charge of your debt and create a more prosperous future.