Well, the answer is yes. Both of these are general solutions in order to provide some debt relief. However, it can be difficult as well as confusing when it comes to selecting any one out of the two for your debt problem. The reason is both of them are too similar to each other to tell the difference. However, here you will find differences between the two listed. Read on so that you can understand the difference between the two and make your decision.

Credit accounts

With only a few exceptions that permit you to maintain some useful accounts needed for business, generally, credit counselling makes you close all of your existing credit accounts. However, in case of debt reduction, no such requirement is there. While keeping any credit accounts working will help you in times of emergency, it will also put you at a risk of adding more debts. Thus, if you think you still can control your usage of credit card, then go for debt reduction.

Debt liquidation period

While debt reduction will allow you to pay off your debt in about 2 years time, credit counselling takes a little longer about 5 years to make you debt free.

Total sum of the debt

Credit counselling helps you by dealing and negotiating with your credit card company to offer you a lower rate of interest. As a result, you have some relief with a reduced interest rate. However, the total amount due, remains the same. In this case, you will save on the low interest payments. However, as far as debt reduction is concerned, negotiations are done with the creditors in order to reduce the entire amount of the debt. This reduction can be anything between 20% and 60%. This can be a definite advantage.

Credit score

In case you choose to get into credit counselling instead of debt reduction, after you have successfully made only three payments, all your accounts are refreshed to a current status. However, if you select debt reduction, then you will suffer on credit score. This is because the credit report states this as a late payment even though you are trying to settle your debt. However, once you have repaid your debt, the creditor will state that the account is “settled in full.” Any program for debt reduction will have this in the contract.

Now, it can be much easier for you to select which one solution you want to opt for.