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Compare Debt Negotiation vs Credit Counseling

Kathleen Esposito
Need debt advice?
Need debt advice?

At first glance the two services may seem almost identical, but if people stop to really compare debt negotiation vs credit counseling, they find that they are quite different. While both services aim to achieve the same end result, they do not go about it in identical fashion.


Debt Negotiation

Debt negotiation is just that, negotiation: a give and take conversation between a creditor and a consumer. Consumers can try to do the negotiating themselves or they can get help from legal counsel. Basically, individuals who are having trouble paying their minimums each month try to work out new payment plans with their creditors that could include the following:

  • Stretching the payments out over a longer period of time
  • Reducing the minimum payment required
  • Allowing the consumer to repay only a percentage of the debt
  • Lowering the interest rate

Even if the creditor ends up getting less money in the long run, it can still benefit from debt negotiation. This is because if the consumer instead declares bankruptcy the creditor will not get paid at all.

Credit Counseling

Credit counseling is not something consumers can do themselves. They have to work with a credit counseling service. It is the service's job to work with the creditors as an arbitrator to come up with similar solutions to those listed above. Instead of the consumers paying their creditors, they agree to pay the service, which then distributes the money as needed. This may be a good option for the consumer who:

  • Is not confident in his or her debt negotiation skills
  • Has trouble remembering to pay more than one bill each month
  • Wants a one stop shop to handle all of the debt management issues

Note that there are companies that bill themselves as debt negotiation companies, but they are really just credit counselors going by a different name.

Risks and Benefits

When people choose to compare debt negotiation vs credit counseling, they need to consider the risks of both services before deciding which one is best for them. One that's worth noting is that working with a service will show up on a credit report. While regular on-time payments receive the designation paid as agreed, modified payments will be marked simply as paid. This is the case with either service. Here are some risks that set the two apart.

Risks of Debt Negotiation

  • Working with a lawyer could be prohibitively expensive. Many cost $200 an hour or more for a simple consultation.
  • It can be hard for an inexperienced negotiator to get the best deal. Some consumers may not end up with the best payment plan.
  • Negotiation can be very stressful and consumers will need to negotiate with each creditor separately.

Risks of Credit Counseling

  • Most credit counseling companies will charge an upfront fee before they will begin working with the consumer.
  • Consumers can feel somewhat out of the loop since they are not involved directly in the negotiations.
  • There are a lot of credit counselors out there that simply take consumers' money and don't provide much debt help at all. Consumers have to do a lot of background research to make sure they pick an honest company. A good bet is to find one affiliated with the National Foundation for Credit Counseling.


Unlike the risks, the benefits of the two services are shared. They are that consumers can see a reduction in their total amount of debt almost immediately and arrange for a payment plan that better fits with their current financial situation. This can help them to avoid bankruptcy and charge-offs that can mar their credit reports for up to seven years.

Compare Debt Negotiation vs Credit Counseling: Which Is Better?

There is no hard and fast answer to this question, unfortunately. It depends upon each consumer's situation. In fact, in some cases, neither option is better and the person is better off declaring bankruptcy. The best way for individuals to determine the path they should take is to first create a monthly budget and determine if they can manage their debt on their own. If not, they should speak with a financial consultant before making a firm decision.

Compare Debt Negotiation vs Credit Counseling