Credit Counseling vs. Debt Settlement: What’s the Difference?

Credit Counseling vs. Debt Settlement: What’s the Difference?

When you’re facing debt, it’s important to understand the difference between trusted, nonprofit credit counseling and for-profit debt settlement companies. American Financial Solutions (AFS) is a nonprofit credit counseling organization, and we want to be very clear: we do not offer debt relief, debt settlement, or credit repair services. These services often come with high costs, significant risks, and long-term damage to your financial health.

Our mission is to provide education, tools, and structured debt management programs (DMPs) that help you repay what you owe—not to negotiate “quick fixes” that could harm your credit or lead to unexpected fees.

What Is Credit Counseling?

Credit counseling is designed to help you pay your debts in full and create a plan for long-term financial success. As a nonprofit, AFS provides:

• Personalized budgeting and guidance to create a realistic repayment strategy.
• Debt management plans (DMPs) that simplify payments by combining unsecured debts, such as credit cards, into a single monthly payment.
• Negotiation with creditors to lower interest rates and waive certain fees—without encouraging you to stop paying your accounts.
• Education and resources to strengthen your financial literacy and long-term financial health.

Unlike debt settlement, credit counseling focuses on repayment and financial education rather than promising to “erase” or “reduce” what you owe.

Why We Warn Against Debt Settlement

Debt settlement companies are for-profit businesses that often require you to stop paying your creditors while they attempt to negotiate a lump-sum settlement. This approach:

• Can take years to complete with no guarantee of success.
• Damages your credit score by requiring missed payments.
• May lead to lawsuits and collections.
• Often includes high fees (15–25% of your total debt).
• Can create tax liabilities, as forgiven debt is considered taxable income.

American Financial Solutions does not offer or endorse this approach. We believe in paying what you owe while preserving your financial reputation, rebuilding a solid payment history, reducing debt and avoiding unnecessary risk.

Key Differences Between Credit Counseling and Debt Settlement

Credit Counseling (AFS approach)

• Nonprofit and focused on consumer education.
• Works to repay your debts in full with reduced interest rates.
• May help maintain or improve your credit score over time.
• Provides long-term financial tools and support.

Debt Settlement (Not offered by AFS)

• For-profit and fee-driven.
• Encourages stopping payments to force negotiations.
• Damages your credit for years and can result in lawsuits
• Involves no education or budgeting support.

Consumer Debt Consolidation vs. Debt Settlement

American Financial Solutions does not provide high-interest debt consolidation loans or debt settlement programs. Instead, we offer debt management plans that combine multiple unsecured debts into one structured monthly payment without requiring you to take on new loans. This approach is not “debt relief”—it’s a structured way to pay off what you owe with reduced interest, fewer fees, and professional guidance.

Choosing the Right Path

If you’re considering how to manage your debt, ask yourself:

• Do I want to pay off what I owe and preserve my credit health?
• Do I want to avoid high fees and risky tactics?
• Do I need education and long-term budgeting support?

If the answer is yes, credit counseling is a safer, proven choice. Debt settlement may promise quick results but often leaves consumers worse off financially.

American Financial Solutions: How We Can Help

American Financial Solutions is a trusted, nonprofit organization offering confidential credit counseling and debt management plans—never debt settlement or credit repair. We work with your creditors to lower interest rates and create a manageable repayment plan while providing tools to improve your financial health.

If you’re ready to take a positive step toward becoming debt-free, contact AFS today. Our certified counselors will help you create a personalized plan to pay off your debts responsibly and build a secure financial future.

Published Sep 22, 2025.