(Franklin Debt Relief offers a debt settlement program to consumers and is not a credit counseling agency.  The information presented below is for educational purposes, so that consumers can make a more educated decision on whether debt settlement, the service offered by FDR, or credit counseling, the option described below, is a better debt relief solution for their situation).  

It's impossible to definitively answer the credit counseling versus debt settlement debate because it depends on a number of variables that differ from person to person. The purpose of this article is break down which factors you should consider before choosing the appropriate option.

1. What can you afford? Credit counseling programs tend to be more expensive in terms of the monthly program payment than debt settlement programs. The reason is simple: credit counseling services produces results on the interest rates, whereas debt settlement in many cases can help you resolve your debt for less than you owe. Of course, debt settlement also comes with other risks and disadvantages, such as the credit impact, possibility of litigation by one of your creditors, taxes on your savings and collection calls, to name a few.  However, from a savings standpoint, debt settlement offers the lower program payment and if your accounts are successfully settled, the overall cost is likely to be less than credit counseling.   Although this is undoubtedly an important factor, it is not the only variable to consider before making a decision on which program is best for you.

2. What sort of credit impact can you tolerate? Some credit counselors out there will undoubtedly tout that their program doesn't affect your credit score negatively. This is a play on words. Sure, your score won't drop, but it still shows up on your credit, although the past due marks from a debt settlement program is still certainly worse for your credit.   The bottom line is if your top priority is your credit, then both should be avoided.  If you can’t afford to pay off your debt without third-party help, then credit counseling will be better for your credit history.

3. Who do you owe? So you can save more money in debt settlement, but not always. If you owe a more aggressive creditor like Discover or Capital One, then it's possible that credit counseling or bankruptcy may be a better option for you. The reason: Capital One and Discover not only tends to settle for more on average, but they are also more likely to pursue legal action to collect a debt. Although FDR has settled with both, it is a riskier undertaking when you're dealing with Capital One or Discover.  In terms of credit counseling, there are also a number of creditors who refuse to offer interest rate concessions to people who enroll in a debt management plan.  You should ask your credit counselor about this before you enroll.

4. What is your personality type? It’s amazing how most finance authors eliminate the human element from this discussion. The bottom line: debt settlement is not for the faint-hearted. There is no guarantee that everything will work out completely as planned. Some settlements may be higher than estimated. Some settlements may be lower than estimated. Some accounts may not settle. You will inevitably get some creditor calls. This is the nature of the program, and you must be willing to accept some level of uncertainty before enrolling.

The 4 questions were organized in this order on purpose. After all, if you can't afford credit counseling, then it's pretty much out of the picture as an option for you anyway. It’s also important to remember we live in a material world and issues like having an anxious personality must be sacrificed when you don't have the money necessary to freely exercise this aspect of your character. On the flip side, if you have 100% Discover debt, it would be foolish for you to choose debt settlement over credit counseling or bankruptcy just because you fancy yourself a risk-taker.

There are countless other variables that influence whether a debt settlement service or credit counseling program is appropriate for you (i.e. what state you live in, your income source, etc..). Your best bet is to discuss your individual situation with consultant.