Some people think that credit counseling is similar to debt settlement because both options have the final result of dumping debt. However, credit support and a debt settlement program is completely different when it comes to the method of shedding liabilities. With credit support and debt management, the company provides support services and debt management options for the person in debt. On the other hand, debt settlement works by settling obligations for a lower amount than the original balance. For example, you owe $7500 to a credit card company. The company can settle for $5000 if you pay the amount in full . This way you pay less than what you owe.The process of a debt settlement program is straightforward. You go to a debt settlement company to ask for debt help. And instead of paying your original creditors, you make monthly payments to the debt settlement company. The debt settlement company then holds your money in a settlement fund. When your settlement fund accumulates into a substantial amount of money, the debt settlement company will then contact your original creditors to arrange for a settlement. Debt settlement appears to be a good deal. But do not stop there yet. You have to consider several factors before going for a debt settlement program. First, you have to remember that debt settlement can damage your credit standing. Majority of creditors don't accept staggered payments for one big balance and most consumers do not need to money to pay the debt in total. Since consumers can't afford to pay their creditors as well as wait for a settlement fund to accumulate, they have a tendency to stop paying their lender directly. This action will lead to the account being overdue and therefore reflects negatively on one's credit score. Keep in mind that payment history makes up 35% of your credit history. Apart from this, you may continue to receive collection calls and letters because creditors continue with their collection practices while you wait for your settlement fund to increase. Worse, you can even end up facing a lawsuit if the company gets desperate waiting for your payments. In case your debt settlement pushes thru, you can expect to be taxed on the balance forgiven by your lender. So see a tax advisor before going for debt settlement. However, debt settlement can be suitable in select eventualities such as when the account is delinquent and when the credit score already reflects this. As much as is possible though, it is best to have a look for other options if the credit score of a person can still be saved. With a debt management program, the counseling company works side-by-side with the creditors to relieve debt by reducing interests and stopping overlimit charges. They also work towards lengthening the repayment terms. In a debt management program, you will also make standard payments to the counseling company. The sole difference is that your payments will be distributed to your lender inside one week. These are the massive differences between a debt settlement program and a credit support service. If you are heavily indebted, talk to your fiscal counsellor for the right plan to take.