When looking for a way to settle debts, undoubtedly you will come across these two options – debt negotiation and credit counseling. Basically debt negotiation is when you negotiate the debt with your creditors. This can either be done by you personally or you can get help from the professionals.

This plan is normally chosen by consumers who have trouble making their minimums each month. A new payment plan will then be worked out which might include the following:

• Low monthly installments over a longer period of time
• Only a part of your debt will need to be repaid (the other portion of the debt will be forgiven)
• You will be given a lower interest rate

Your creditors are only interested in getting their money back, if not all then some. Your creditors should be interested in helping you because, if you were to file for bankruptcy, they will not be able to get their money and will have to file it as a loss.

On the other hand, credit counseling is not something you can do on your own; instead you have to work with a credit counselor. Then, the credit counselor will work with your creditors to come up with a way to settle your debt and most of the time – the solutions are almost the same as with debt negotiation.

To know if you need credit counseling services, you have to find out whether you match the characteristics listed below:

• You do not have good debt negotiation skills
• You need help remembering how many bills you have to pay each month
• You wish that you only needed to pay one party who will then distribute payments to your creditors.

Like with everything else there are risks associated with both debt negotiation and credit counseling services which are listed as below:

Debt Negotiation risks:

1. Working with a lawyer can be very expensive
2. If you are try to negotiate debt on your own, you might not get the best deal if you are inexperienced
3. You have to negotiate with each creditor separately and this task could be stressful

Credit Counseling risks:

1. Most companies charge an upfront fee before even working with you
2. You can feel left out because you will not be included in the negotiations
3. A lot of research is required on your part as many counseling services take money without providing much assistance.

But, the benefits are actually the same. You will be able to see a reduction in your debt, you will get a payment plan that will suite your budget and you can better manage your finances, reducing the risk of you filing for bankruptcy and putting a permanent blemish on your credit report.

There is no definite answer about what will be the best option as this will depend on you and your financial situation. You will need to find the best companies in both fields, contact them, and see what they can do for you and what the outcome on your debt would be before you decide.

It will be a lengthy process, but by the end of it, you will get the satisfaction of having your debts reduced or renegotiated to something you can afford.