- Credit counseling and debt settlement are worth examining if you are struggling with usecured debt.
- Weigh the affordability of any debt relief options, as you have to make the monthly payments for the programs to work.
- Consider Freedom Debt Relief, if you are seeking a successful debt settlement program.
I am struggling to keep up with my minimum monthly payments. I can't decide which is better Consumer Credit Counseling Services or Debt Settlement with Freedom Debt Relief.
I am struggling to keep up with my minimum monthly payments. Some of my cards are maxed out. I can't know I need to do something, but I can't decide which is better: Credit Counseling Services or Debt Settlement with Freedom Debt Relief. What's best?
Thanks for your question. Good for you for focusing on finding a solution for your debt problems. Realizing that you need to make changes is an important step.
Freedom Debt Relief (FDR) is a leading debt settlement company, the largest in the US, and has been in business since 2002. Before going into more detail about FDR, let me address the differences between debt settlement and credit counseling, so you can decide which is the best fit for you.
I'll outline how consumer credit counseling and debt settlement work and present some pros and cons of the two different debt resolution options. I won't overwhelm you by trying to cover all the details about each program, but present to you some key facts about each approach that will help you make a decision.
Free Debt Consultation
If you want to review your debt relief options with a Certified Debt Conusltant, you can receive a free consultation by calling 800-610-4560.
Debt settlement, also called debt negotiation, is a form of online debt consolidation that reduces your total debt and the size of your monthly payments. Debt settlemtent is designed for people with more than $10,000 in unsecured debt who have a financial hardship that makes them unable to make their monthly payments or about to reach that point.
The debt settlement firm handles communications with your unsecured creditors and negotiates reduced balance settlements that are paid from the money you build up from the monthly program payments you make. Debt settlement programs typically run around three years to four years.
During the life of your debt settlement program, you choose to NOT pay your creditors. This means that a debt settlement solution harms your credit rating. If your credit is already suffering, from maxed out cards or late payments, the credit impact is less of a concern. Still, debt settlement is for you if the trade-off of negative credit impact for the benefit of msaving money and getting out of debt with a low monthly payment.
Debt settlement is usually the fastest and cheapest way to debt freedom that avoids Chapter 7 Bankruptcy.
Debt Settlement Pros
- Low monthly payment - Debt settlement has a smaller monthly payment than other debt relief solutions.
- Low total costs - Debt Settlement has the lowest total costs of any debt relief solutions outside of Chapter 7 bankruptcy
- Privacy - Debt settlement is not a public matter, as opposed to bankruptcy.
- Speed- Debtt settlement has the shortest time to getting out of debt of any debt relief solution, other than Chapter 7 bankruptcy.
Debt Relief Cons
- Credit harm
- Collection calls may come in
- Creditors don't have to settle and can choose to pursue legal action against you
- Results vary, so the total costs presented to you are an estimate.
Consumer Credit Counseling Services start by assessing your situation, to understand your debt problems, spending habits, and your cash-flow available for paying off your debt problems. Many credit counselors will offer free budget advice, review your credit report with you, and share tools to improve your financial literacy, with a goal of helping you establish financial habits that will benefit you in the long-term.
In terms of debt relief solutions, a credit counseling service offers a Debt Management Plan (DMP). A DMP only accepts unsecured debts. A DMP can potentially help wth your credit card debt, especially high-interest credit card debt, but it can't help with your mortgage or auto payment. A DMP is is viewed as a form of debt consolidation because you make one monthly payment to the credit counseling firm and they send out payments to your different creditors enrolled in your DMP.
Credit Counseling Services have relationships with creditors that allow them put in place interest rates on your accounts that can be much lower than what you are paying. Not every creditor offers low rate through a DMP, but you will be offered a black and white proposal, with specific rates for each creditor. Before you sign up, you will know exactly how many monthly payments you need to make at a specified amount, in order to pay off your debt.
Credit Counseling Pros
- Stops collections and may be able to get some fees and penalties waived.
- Reduces total costs to get out of debt.
- Presents you a set payment for a specific number of months that will pay off you enrolled debts, if you make the payments
- Doesn't affect credit score
Credit Counseling Cons
- High dropout rate due to customers inability to afford the monthly payment
- Have to close all enrolled accounts
- Difficult to get a car loan or other credit during the DMP and rates will be very high if a creditor will work with you
Debt Settlement or Credit Counseling, Which is Right for You?
Making the right choice for your situation comes down to deciding what you need to succeed and the level of risk you are willing to accept.
I suggest you start with a key factor: Affordability.
Debt settlement offers the lowest payment. If you compare program payments and can't afford the credit counseling program payment, don't commit to it. It only works if you make the payment each month.
If you can afford both payments you are offered, then you need to weigh the total costs being lower in debt settlement against the fact that the credit counseling program will protect you from collection effors.
Also account for how important it is to you each month to have the extra money in your pocket that comes from the difference between the lower debt settlement payment and the higher credit counseling payment. If that difference allows you to pay obligations you couldn't pay while making the the credit counseling payment, that could be a huge factor.
The amount of debt you have is also very important, as debt settlement firms often have a higher minimum debt enrollment requirement ranging from $7,500 to over $10,000, whereas credit counseling firms will accept debts as small as $3,000 to $5,000.
Freedom Debt Relief
If you choose debt settlement then I can tell you that Freedom Debt Relief is a good company. Here are two useful references to Freedom Debt Relief reviews. You can read verified customer reviews of Freedom Debt Relief customers at the website of TrustPilot, a leading independent consumer review site. You can also read Freedom Debt Relief reviews at the Freedom Debt Relief website.
Yes, Freedom Debt Relief appears to be a great option, if you are seeking debt resolution or negotiated debt settlement. We have done a thorough review in the Bills.com resource Freedom Debt Relief Review.
Here are some other facts:
- Freedom Debt Relief has an A+ Rating with the Better Business Bureau .Freedom Debt Relief is the largest debt resolution firm in the country.
- TFDR has settled over $10 billion in debt, serving over 600,000 customers
- One of the Founders of Freedom Debt Relief is on the Board of Directors of the AFCC (The American Fair Credit Council).
- Longevity and stability. They've been around since 2002 and have settled more consumer debt than any debt settlement firm.
I hope this information helps you Find. Learn & Save.
Dealing with debt
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q3 2023 was $17.291 trillion. Housing debt totaled $12.489 trillion and non-housing debt was $4.802 trillion.
A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.
Each state has its rate of delinquency and share of debts in collections. For example, in Pennsylvania credit card delinquency rate was 4%, and the median credit card debt was $387.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.