debt | college loan debt

college loan debt

What Are The Differences Between Debt Reduction And Credit Counseling?
By Cornie Herring
In today's world, it is often easy to get in over your head and find yourself spending more than you make. It seems that everything is going up but wages, and it is all too easy to fall behind. As the result, incurred and accumulated over the time; initially, you are able to pay your credit card balances in full on each month and when more and more accumulated, you may go for minimum payment, then when come to the, your income may not afford to even support the minimum payments.

Like many who trap into unbearable debts, you may want to get rid of your debts by filling a bankruptcy. But bankruptcy can carry a legacy you will have to live with for years. A bankruptcy filing will stay on your record for a minimum of seven years, and you may find it difficult or impossible to obtain necessary credit in the interim.

Luckily, there are still others possible alternatives before you make up your ultimate decision on bankruptcy. You can enroll into a reduction program or enroll in a credit counseling program. These are the most popular solutions for many debtors, but you may confuse what are the differences between these two popular solutions, making you hard to decide your choice to enroll to credit counseling program or reduction program.

While there are some similarities between these two types of programs, there are some important differences to consider as well. Let us consider a few of the most important differences between reduction and credit counseling.

1. Close Your Credit Accounts

In credit counseling program, you will require to close all your credit accounts, exception for some exceptions like accounts for business needs, accounts with zero or very small balances. Whereas, reduction programs do not require all credit accounts to be closed. Sometimes, it's good to keep a few of credit cards for emergency purposes.

2. Completion Period

Credit counseling services typically take longer to complete than reduction services. The average length of time to liquidate through a credit counseling service is 5 years whereas in reduction programs can be completed in less than a year.

3. Cost Saving

One of the advantages of reduction program over credit counseling program is in term of cost saving. In reduction program, you may only need to pay a settlement amount of 20% - 60% of amount owned. Whereas, in credit counseling program you normally need to repay a full amount owned with some discount and interest waived.

4. Credit Score

Your credit score is more affected in reduction program as compare to credit counseling program. In reduction program, the creditors may report the remaining amount between the amount you owned with the settlement amount as the "deficiency balance" to the credit bureaus as a negative item and it will be noted at your credit report and impact your credit scores. Generally, credit-reporting agencies will re-age the accounts of consumers enrolled in credit counseling services after three payments have been made.

5. Bargaining Power

In credit counseling program, your credit counselor will come out a repayment proposal to your creditors and it relies on your creditors to accept or reject the proposal. Whereas, with a reduction program, all creditors are will be notified about your hardship situation to repay your and you are desired to resolve it through a negotiated reduction agreement. Hence, creditors have no much choice in reduction program except try to negotiate to get back as much payment as possible from their debtors.

In Summary

Both credit counseling program and reduction program are a better solution option than bankruptcy. The two programs serve the same purpose to help you to get out from debts, but there are some differences between these two solutions and each program has its own pros and cons.

Article Source: http://articles-galore.com

Cornie Herring is the author from www.StudyKiosk.com. "StudyKiosk-Credit Basics" is an informational website on credit basics,
Bank of England Surprises with Base Rate Hike
The surprise 0.25 percentage point hike in the base rate by the Bank of England to 4.75% left the majority of borrowers and economists wrong footed, sending UK equities, Gilts and short sterling falling. But with inflation the only focus of the BoE, the question may not be if, but when will rates rise again?


target="_blank">debt solutions and bankruptcy.

Products and Services mentioned in this article are available Here

         

>

10 Debt Consolidation Facts You Should Know
By Darnell Scott
The first thing to understand is that credit counseling and debt consolidation is not the same thing. Credit counseling involves a debt counselor working with you to assist you in making a budget so Read more...

A Debt Consolidation Program To Relieve Debt
By Roberto Bell
Debt consolidation programs are good if you are paying on several different loans. They can make your life easier by giving you one monthly payment. Your monthly debt decreases if the program you use Read more...