Karn Sangini

Consumer finance, credit cards and their ensuring debt are a part and parcel of everyday life for many people living in today’s world. However, credit card debts and other personal loans such as house building loans, car loans, financial loans, and college loans along with their monthly interest payments may end up increasing inexorably. In fact, there may actually come a time when they might end up far outpacing your natural ability to earn enough to pay back all your loans, both principle and interest together.

Even as the ‘income to loan’ gap steadily increases, odds are that you may find yourself trying your level best to simply stay afloat while making minimum payments in a failed bid to keep your creditors at bay. This is the time where you might need to call in the professionals.

When it comes to professional help in debt management, there are two very different kinds of organizations that may be able to help you out of your predicament. Whichever one you choose will be entirely up to your own assessment of the nature and type of organization that will serve your own specific requirements. These include the following:

  • Debt negotiation/debt settlement companies
  • Credit counseling companies

While both of the above organizations serve the core purpose of helping you out of the debt trap, how they go about doing it is entirely different.

o   Credit Counseling

Credit Counseling agencies are also sometimes referred to as ‘debt management’ organizations. In fact, many of these agencies tend to have pre-arranged agreements with various credit card issuing financial institutions. Such agreements effectively enable them to help decrease the overall interest rates on behalf of their hard pressed clients. However, the rate of decrease is generally determined by the creditor (bank or any other financial institution) who may also offer highly discounted rates to the credit counseling company as part of its efforts to reduce and ultimately allow their clients to reassert control over their runaway liabilities. Here, the creditors generally offer them such concessions on the premise that various amounts of lesser profit are considerably better than outright default, in case their debtor is not able to make any further payments.


o   Debt Settlement Companies

Debt settlement companies are also commonly known as debt negotiation agencies. As the term implies, they negotiate with the creditors so as to be able to help lower their ‘principal amounts’ rather than offering any sort of concessions on the interest rates alone.

They may also offer to pay off their client’s debts with lump sum payments that are less than the total amounts the debtor owes to their creditors. However, a point to be noted here is that unlike their credit counseling counterparts, debt settlement/negotiation agencies don’t usually have any pre-determined agreements with the creditors.

However, both of the above have the same purpose and that is to help you get rid of your debt burden.