Most of the credit counseling programs that you will enroll for might require you to do away with all your credit accounts. These programs however, do offer some concession for accounts that are required for your business needs and accounts where you have little balance. But with debt reduction there are no such impositions and therefore you can keep your credit accounts working. So if there is an emergency need and you are required to draw money from your credit card account, debt reduction programs will give you that option but credit counseling ones wouldn't.
Compared to a credit counseling program a debt reduction program will rid the client of his debts in considerably less time. Whereas credit counseling programs take an average of five years to do away with the entire debt, a debt reduction program can liquidate the entire debt even under a year.
With debt reduction programs a consumer would need to pay much less than what he will have to if he enrolls into a credit counseling program. The reasons are simple to understand. In a credit counseling program what is negotiated is your rate of interest on the credit you have. But in a debt reduction program it is your actual debt amount that gets reduced. And this reduction can be anything between 40%-80%. Now that is a lot of reduction we are talking about. The industry average of 50% is a very attractive figure for anyone who is in debt.
The client's credit score is also affected differently with different programs. When enrolled in a credit counseling program the agency generally re-ages the accounts after three payments are made by the client. But there are no such changes made by a debt reduction program. The status of the account remains unchanged. So if the client has a current account, it will stay that way. If the account has past its due, no alteration will be made.
In a debt reduction program the client has a much greater bargaining power than what he has in a credit counseling program. What happens in a credit counseling program is that a submission is made to the creditor on how the client plans to repay his loan. It depends on the creditor if he accepts the new terms. In a debt reduction program a lot of negotiation happens and a the creditor is made fully aware of what the situation of the client is.
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