The math is brutal. At an average interest rate of 22%, all it takes is a revolving credit card balance of a few thousand dollars to find yourself in serious trouble, especially as the interest charges compound over time. Yet this scenario describes what millions of Americans are facing right now, as the collective credit card debt is now sitting at $1.21 trillion nationwide.
With inflation and other economic stressors also adding to the issue, the traditional advice of “just pay more than the minimum” rings hollow for a lot of borrowers. That’s why more borrowers are now exploring the options they have to regain control over their finances. Debt relief programs and credit counseling are two of the more common avenues, but they work quite differently.
If you understand how each approach operates, what costs are involved and the potential impact on your credit, though, you’ll be better prepared to choose the option that fits your financial goals.
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Debt relief programs vs credit counseling: What to consider in 2025
When weighing your options, it’s important to look beyond the surface. Both debt relief programs and credit counseling offer ways to manage or reduce debt, but they differ in strategy, timeline and potential consequences. Here’s what to consider:
How each approach works
Debt relief programs typically involve strategies that help you resolve your debts for less than you owe. These can include approaches like debt settlement, where the goal is to pay a lump sum or a series of settlement payments in return for having a portion of your debt forgiven, or debt consolidation, which rolls multiple balances into a single loan with a potentially lower interest rate.
Credit counseling, on the other hand, focuses on education and budgeting, and the emphasis is on repaying what you owe over time rather than reducing the total balance immediately. When you work with a credit counseling agency, they will typically help you create a debt management plan, which may include negotiating lower interest rates or waived fees with your creditors while you make structured monthly payments.
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Costs and fees
Debt relief programs charge fees for the work they do, which are typically calculated as a percentage of the debt enrolled in the program. Some companies require you to pay monthly maintenance fees as well. These costs can add up, so it’s critical to understand the fee structure before enrolling, and then weigh those costs against the potential savings you may get in return.
Credit counseling agencies often charge nominal setup fees for a debt management plan, and the monthly fees are typically low or, in some cases, income-based. Since most reputable credit counseling organizations are nonprofit, the focus is more on affordability than profit.
Impact on credit
Debt relief programs can have a significant impact on your credit score. Negotiating a settlement or failing to make regular payments during a settlement plan can be reported to credit bureaus, and may remain on your credit report for several years. However, settling your debt can also improve your debt-to-income ratio.
Credit counseling generally has a milder effect on your credit. While enrolling in a debt management plan is noted on your credit report, your debt management plan emphasizes making on-time payments, which can gradually help rebuild your credit.
Timeline for results
Debt relief programs can provide faster debt reduction if settlement negotiations are successful, sometimes cutting the payoff period by years compared to making only minimum payments. However, the process is not guaranteed, and some types of debts may not be eligible for settlement.
Credit counseling is usually a slower process. Debt management plans can take three to five years to complete, but the structured approach often prevents additional late fees and interest from accumulating, offering a steady path to becoming debt-free.
Risks and trade-offs
Debt relief programs carry risks beyond credit score impacts. There’s the potential for scams, tax consequences on forgiven debt and pressure from aggressive collection tactics if negotiations stall.
Credit counseling risks are comparatively low, but they require strict adherence to the plan and personal budgeting discipline. Missing payments within a debt management plan can also nullify negotiated benefits and prolong debt repayment.
Suitability based on financial situation
Debt relief programs may appeal to those with substantial unsecured debt who are struggling to keep up with payments and want to reduce their total owed balance. Credit counseling, on the other hand, tends to benefit those who can maintain consistent payments but need help organizing their finances, negotiating lower interest rates and creating a realistic repayment strategy.
The bottom line
Choosing between a debt relief program and credit counseling comes down to factors like your financial goals, risk tolerance and ability to commit to a structured plan. Debt relief can offer faster reductions but comes with higher risks and potential credit damage. Credit counseling provides a steadier, lower-risk path to debt repayment while helping you develop budgeting skills that can last a lifetime.
Before making a decision, make sure to research reputable providers, understand all fees and consequences and consider consulting a debt expert who can help you better understand your options. In a landscape of rising debt and high rates, making an informed choice can be the difference between financial recovery and continued stress.