I am looking to make a generic config file using variables such as:
$PLACEHOLDER_USER

Then after moving the file into the correct position I want to replace every instance of $PLACEHOLDER_VARIABLE into the value of $VARIABLE from my settings.sh file.

In the example below "$PLACEHOLDER_USER" in log.conf would be replace by "tom".

log.conf

deploy = $PLACEHOLDER_USER

settings.sh

USER="tom"

deploy.sh

FILE="/home/logging/log.conf"
ln -s /home/log.conf $FILE
while IFS== read variable value
do
sed -i "s/\$PLACEHOLDER_$variable/$value/g" $FILE
done < settings.sh

Is there a better way of doing this?

A better way to take the long way around to do things?? Why not simply use the variables as they are named in settings.sh and then simply source that at the start of your script.

This way there is no need for any messy seds or altering IFS.

You would need to explain further why you think the method you are trying to employ is better??

- Are you saying I can source the settings file no matter what style my configuration scritps are and what the program is?
- Would it impact my performance since I am linking my settings to another file or would they just be loaded into memory.
- What about being accessible by all different user accounts, would I have to duplicate the file in each users directory?

nginx-server.conf
server {
listen 80;
server_name api.$DOMAIN;

supervisor.conf
[unix_http_server]
file=/var/run/$ID.sock

uwsgi.conf
[uwsgi]
#master = true
processes = 2
uid = $USERNAME

You could also use an existing macro processor such as cpp or m4. YMMV.

Why stray from bash. Using SED really isn't a big deal is it?

Not sure I follow? If you use sed that your script is not strictly all bash but using an external command. The pros and cons are around whether or not it is more expedient to use sed and in this case I do not believe so.

As to your questions:

- Are you saying I can source the settings file no matter what style my configuration scripts are and what the program is?
What do you mean by style?
Are the scripts you are calling bash scripts, if so then yes source away

- Would it impact my performance since I am linking my settings to another file or would they just be loaded into memory.
The overhead would only really be if the location of the file prevented you sourcing it when needed, ie on a network connection that has yet to be connected

- What about being accessible by all different user accounts, would I have to duplicate the file in each users directory?
Well this would be a question for you, ie your example uses a USER variable, is this related to the user logged in or will it be the same user for all?

It looks like the conf files are not bash, so I think that wouldn't work. Maybe something like