Credit Counseling vs. Debt Reduction

Credit counseling is becoming more popular each day. Even the new bankruptcy laws contained within the Bankruptcy Abuse Prevention and Consumer Protection Act (2005, Senate Bill 256) requires completion of mandatory credit counseling and budget analysis as a condition of filing Chapter 7 or Chapter 13. Reduction Services are quite different, yet equally popular. Most often, reduction services target expenses, and especially credit cards and interest rates, for negotiation, reduction, and discount settlements. How do results of credit counseling vs. debt reduction compare? That depends. It depends on the services and companies compared. Both types of services are widely available, and more importantly, terms, costs, benefits, risks, and rewards vary significantly. To answer the question sensibly, comparing credit counseling vs. debt reduction requires a detailed look at costs and benefits from actual quotes.

Advantages of credit counseling vs. debt reduction

Credit counseling frequently includes reduction services as part of a more comprehensive approach to financial recovery. Also, costs of credit counseling vs. debt reduction services tend to somewhat lower. More importantly, benefits received by individuals who choose credit counseling vs. debt reduction are no more, and often less, than several other choices. Credit counseling is designed to promote financial education and understanding, whereas reduction services presume financial survival is a first priority, and concentrate of slashing expenses first.

Disadvantages of credit counseling vs. debt reduction

Many credit card companies highly subsidize non-profit credit counseling services. The mandatory requirement for credit counseling, during the 6 months before filing bankruptcy, was included within the new law form bill at the insistence of credit companies, banks, and other lenders. Counselors tend to protect credit card companies first, and recommend full payment as a means of avoiding bankruptcy, although reducing cards or bankruptcy may be in the best interest of the individual. Further, participation gives fair notice to all creditors that bankruptcy is more likely, and may accelerate collection efforts. Choosing between credit counseling vs. debt reduction then is more of personal choice, and a counselors advice should be considered but one opinion of many available from other highly trained professionals whose loyalty remains beyond question. Nevertheless, many counselors do not accept subsidies. These independent counselors tend to charge somewhat higher fees, and produce significantly more favorable results when representing only the best interest of the customers.

Compare all options before reaching a decision

Actual quotes for costs and benefits are the only accurate source for comparisons. As a point of beginning, compare several different types of services, and several competitors within an industry, to see the range of options available. Then, your best choice will rise to the top. The forms and worksheets we provide make this comparison easy, including instructions, tips and recommendations for companies a services that do not charge application fees for quotes. And of course, all forms and instructions are free of charge, without cost or obligation of any kind.