With more and more Americans turning to debt reduction, the level of media attention to debt relief options has increased dramatically. Unfortunately, much of what is communicated and widely assumed about debt reduction is false or skewed. The purpose of this article is to dispel some of the most common misconceptions about debt reduction solutions.

*You need a home to be eligible for debt reduction. Debt negotiation does not necessitate home ownership whatsoever. Since it involves providing a service and not a loan, debt settlement can potentially resolve your debt for less than you owe and help you avoid bankruptcy without any collateral necessary.

*Debt reduction involves consolidating your debts and lowering your interest rate. While credit counseling companies do offer this service, debt settlement programs may be able to settle your actual debt for less, not just interest rates, although interest does continue to accrue until the debt is settled.  Click here to read full details about our debt settlement savings estimate. 

*Debt reduction with credit counseling doesn’t affect your credit negatively. While FICO (company responsible for the most widely used credit scoring service) has publicized that enrollment in a debt management program (DMP) does not have a negative effect on your credit score, some lenders will paint quite a different story. Some lenders go as far as to compare the effect of credit counseling on your credit as equivalent to a Chapter 13 bankruptcy filing.

*The negative effect of a debt reduction on your credit is permanent. Although the exact effect of debt settlement or credit counseling is impossible to predict, we do know that it will likely be negative, at least in the case of debt settlement, but it will not be permanent.  For starters, any negative remarks showing on your credit can only be reported for up to seven years. Moreover, by improving your debt to income ratio from settlement (assuming you successfully settle all of your unsecured debts) and showing positive payment history after completion of a debt reduction program, your eligibility for credit will be a matter of time.