What’s the difference between Credit Counseling (Debt Management Program) and Debt Settlement (Debt Negotiation)?
There’s a big difference between the two services. On a Debt Management Program you will pay 100% of your debt back plus interest. Each time you make a payment, your Credit Counseling Agency will disburse those funds to your creditors. You will still receive statements from your creditors showing when your payment posts, your reduced finance charges and your updated balances. With Debt Settlement, you will pay back 40-60% (typically) of what you owe. In order for the creditors to accept this drastic reduction, your accounts need to become delinquent. Therefore, when you make a payment each month to your Debt Settlement Company, the payment is not disbursed to your creditors. Instead, the funds are held in a trust fund until you reach 40-60% of what you owe. Then, the Debt Settlement Company will attempt to make a settlement with your creditor.
Related Questions
- What is Debt Settlement and how does it differ from Debt Management (also referred as Credit Counseling or a Debt Consolidation Program)?
- Whats the difference between Credit Counseling (Debt Management Program) and Debt Settlement (Debt Negotiation)?
- What’s the difference between Credit Counseling (Debt Management Program) and Debt Settlement (Debt Negotiation)?
