Skip to content
United Settlement
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
    • Careers
Debt Relief & Settlement Programs
Logo
United Settlement
phone icon 888-574-5454
client icon Client Log In
  • More
    • About Us
    • Proven Results
    • Reviews
    • Contact Us
    • Debt Settlement
    • Debt Consolidation
    • Debt Management
    • Business Debt Relief
    • Credit Card Debt Relief
    • Debt Relief by State
    • FAQs
    • Blog
    • Sitemap
    • Careers
Qualify For Debt Relief
Debt Relief & Settlement Programs
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
    • Careers
United Settlement » Blog » Difference Between Debt Settlement and Credit Counseling

Difference Between Debt Settlement and Credit Counseling

January 18, 2021

For those individuals who carry onerous levels of high interest rate debt (often in the form of unsecured credit card debt), making ends meet each month while managing debt payments represents an ongoing challenge. Fortunately, there are many non-profit debt help companies staffed with experienced credit counselors who can aid in the process of restoring personal financial health.

If you are carrying too much credit card debt, credit counseling represents a viable option in getting on the road to financial wellness. After speaking with a credit counselor, you can decide whether enrolling in a debt management plan (DMP) that can be facilitated by the counselor at the non-profit debt relief company makes sense for you.

Fact is, enrolling in a DMP won’t be your only available option, as you may decide that pursuing debt settlement through a debt relief company represents a more appropriate alternative. Debt settlement and credit counseling have distinct differences. Read here about the differences between a non-profit credit counselor and a debt relief company.

Difference Between Debt Settlement and Credit Counseling

One of the primary differences between debt settlement and credit counseling is the objective for the end result. Debt settlement is designed to result in a successful negotiation with creditors through which a debtor can save thousands of dollars.

Experienced, reputable debt specialists (such as those at United Settlement) who understand the market and maintain relationships with creditors can provide this service at a for-profit debt relief firm that charges a percentage of the debt savings. Credit counseling, on the other hand, is primarily conducted through a non-profit debt company that helps you understand your options, provides educational materials and can arrange for a debt management plan that reduces your interest expense and monthly payments and if completed, results in accounts being paid in full within three- to five years.

For individuals burdened with high levels of unsecured debt, enrolling in a DMP can potentially make a lot of sense. A DMP is a structured program designed and managed by a non-profit debt relief company that works on your behalf to negotiate lower interest rates and monthly payments with your creditors.

Instead of needing to monitor and make multiple monthly payments to a variety of creditors, a DMP arranged by a credit counselor at a non-profit debt help company allows you to make just one streamlined payment to the debt help company, that then submits appropriate amounts to creditors according to the terms of the DMP. If you think you might benefit from a DMP, begin by choosing a reputable debt help company that is staffed with certified counselors who are trained in debt management.

The non-profit debt help company should be certified by the National Foundation for Credit Counseling (NFCC), which is the largest non-profit financial counseling agency in the United States, certifying credit counselors at more than 50 debt help companies. Every NFCC certified credit counselor undergoes a comprehensive training program that ensures that counselor is fully qualified to assist consumers who may require guidance with their debt situation and a debt management plan.

One of the benefits of a DMP is that it will have less long-term negative impact on a credit score and profile than debt settlement does. However, a debt management plan also requires time, discipline and commitment, with most DMPs taking three to five years to complete.

However, once completed, accounts are not marked as “settled” on a credit report – as will be the case with debt settlement – implying that less was paid than the full amount owed, and this remains on credit reports for seven years. Additionally, although a successful debt settlement can often result in saving thousands of dollars, it does come with tax consequences – as debt settlement savings of over $600 become federally taxable. Since we are comparing the prospect of a DMP and consumer credit counseling vs. debt settlement, let’s take a closer now at debt settlement.

What is Debt Settlement?

Debt settlement takes place when a debtor successfully negotiates a payoff amount for less than the total balance owed. The lower amount is agreed to by the creditor or collection agency and is fully documented in writing. The settled amount is typically paid off in one lump sum, although it can be paid off over time.

Debt settlement focuses primarily on unsecured debt, such as credit cards, and creditors are more likely to settle when a debtor has already demonstrated an inability to pay. Although creditors are under no legal obligation to accept debt settlement offers, negotiating and paying lower amounts to settle debts is far more common than many people realize.

Therefore, if you have already fallen delinquent by four or five months, this can be an excellent time to pursue debt settlement, because delinquent accounts of this nature are edging closer to charge-off status, when the creditor becomes unlikely to recover anything meaningful from the account. If you are considering debt settlement, contact us here at United Settlement for more information.

What is Credit Counseling?

In an initial 30-45 minute interview, the NFCC Certified debt counselor will ask specific questions related to your income and expenses. You should have a clear idea of exactly how much money you have left over at the end of the month after accounting for basic necessities such as rent, food, transportation, utility bills, etc.

You should also be able to clearly discuss all of your unsecured debts – meaning you should know exactly how much you owe on all of your individual credit cards, their respective interest rates and minimum monthly payments, as well as any outstanding medical bills and other personal financial obligations that you may have. Your credit counselor will refer to your credit report to verify that all of the information you provide is accurate.

The credit counselor will make recommendations related to controlling your expenses and enhancing your income while also offering free educational materials that can further get you on the right track financially. After evaluating your situation, the counselor can offer you a debt management plan that includes a reduction of interest rates and monthly payments on your unsecured debts – subject to the acceptance of your creditors.

If you agree to enroll, the duration of the payment schedule will generally be between three and five years. Finally, most non-profit debt help companies charge DMP fees – usually a one-time enrollment fee of $100 or less and regular monthly fees of approximately $50 per month.

Contact United Debt Settlement to learn more about Loan and Payment Relief Options During COVID-19. Give us a call at (888-574-5454) or fill out our online contact form. 

About the Author: Steven Brachman

Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.

Gabriel Gorelik, CEO & Co-Founder
Gabriel Gorelik

Gabriel Gorelik paves the way for customer service and operations at United Settlement. He is passionate about numbers and holds a strong belief in helping anyone with their debt. Before United Settlement, Gabriel received his BS in Finance & Economics from Brooklyn College. After graduation, Gabriel went on to build his first financial services company where he managed thousands of accounts for business and consumer clients. He understands the importance of client satisfaction, professionalism, and exceeding expectations.

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)

Related

Search Blog

Are you in debt? we can help

  • Amount
  • Contact

How much do you owe?

Excellent

Based on 377 reviews.
Overall 4.4 out of 5 stars

View All Reviews

Annette Huggins

March 14

That when it seems like nobody can help United will.

This was a great experience for me. I am just starting but Madelene Gallon made me feel like we were friends for years. She tried to make me feel that she would help me and make sure I got the best deal...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Dylan

February 28

Quick, easy assistance!

I've been working with Ben at United Debt to help me organize and get out of debt for once - I've been dealing with debt for ages and Ben showed me some simple ways to begin dealing with things to keep...

Takota Carrie

February 14

I need help

I really appreciate

JONICA Amber PIRON

December 21

Great!

Renika went above and beyond today to help me. She is wonderful to work with! Thank you again Renika for all of your help today! Happy Holidays to you!

Jayvon

December 20

Paying back

They where great listeners

Shawn abetha

December 14

Everything

Thanks

Robert Phillips

November 23

Do your home eork

Paid several thousand dollars and nothing done. Ended up settling 90%by myself. This is a preatory company. So do your homework. This will never post.

Dm

November 18

Customer service is truly helpful

Renika was so helpful. My account was paid off but I kept receiving notifications. She cleared up the situation.

Jose Rosa

November 16

Great Customer Service

Renika did a wonderful job handling my questions and transactions. She is very patient on the phone and took care of my needs accordingly.

Russ

November 03

Very helpful

Renika did a great job in answering all of my questions in a timely manner. She was polite and friendly. Keep her on the payroll.

Anthony Desoto

October 31

What's Important to me is United Settlement Costumer service !

United Settlement Costumer service is Amazing Everyone is Professional . I am so happy choosing them with my card Debt. thank you all for helping me out .

Ri cky

August 23

That this company has integrity!

A responsive company that keeps it clients up to date and fully informed. I like the fact that I can send them a text and be guaranteed an answer within 24 hrs.

Jerry Bolandis

June 04

Professional and focused on facts and truth not hype. Excellent. We want to know facts.

Great work very professional and great updates. Communication is excellent.

janice head

October 25

trust them

Excellent. Also each time i call there they treat me with respect even though they are probably thinking jerk . You sure have made mess of your life. but they have been taught to smile smile smile. this...

Scott W O'Neill

August 01

Thanks for all your help and negotiations.

Thanks for the update! I have faith in you guys and will continue my payments. Thanks for all your help and negotiations.

Cassandra Robinson

July 30

That A Settlement Was Entered.

I Absolutely Love You All At United Settlements. You All Have Saved My Credit Solutions. I Would Refer Everyone To You Services.

Mildred Yvonne Sherron

July 16

The results of the settlement attempts.

So far, I have found United Settlement more than satisfactory. Very conscientious and very efficient in providing a service in debt settlement. Thank you and all the members of your team who are assisting...

Diana Cardona

July 16

Tough Financial Hard Times During Covid-19

I signed up with United Debt Settlement because of large credit card debts, which had taken a financial toll on my credit. UDS has an outstanding reputation assisting clients like me achieve financial recovery...

  • Contact Us
  • 240 West 37th Street
    Suite 400
    New York, NY 10018
  • (888)-574-5454
  • [email protected]
  • Privacy Policy
  • Terms & Conditions
  • Debt Relief Services
  • Debt Settlement
  • Business Debt Relief
  • Credit Card Help
  • Debt Consolidation
  • Debt Management
  • Student Loan Help
  • Careers
Learn more about debt relief


    • facebook
    • Google Plus
    • Twitter
    • YouTube
    • Instagram
    • Linkedin
    • facebook
    • Tools & Resources
    • Contact Us
    • About Us
    • Blog
    • Debt Calculator
    • Frequently Asked Questions
    • Sitemap
    • Reviews
    • Client Login
    Free Savings Estimate
    Apply Here
    Clients who stay according to debt relief program can realize approximate savings of 50% before fees, or 25% including fees, over 24 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for reasons such as: their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period. We do not assume consumer and/or business debt, provide tax, bankruptcy, accounting, legal or credit repair services/ advice. Our program is not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. If you have any additional questions please contact us. NMLS ID: 1947026
    Copyright 2023. United Debt Settlement, LLC