Debt Settlement Vs Debt Consolidation
With the economy the way that it is today, many people are finding themselves in a credit situation. Sometimes these “credit situations” can get a little out of control and when this happens there are some choices that have to be made. Most of the time, by this point, the situation is beyond just a plan of better budgeting.
Some people will choose to seek the help of a credit counselor while others will examine the thoughts of debt consolidation versus debt settlement and even others will go on to face bankruptcy, which should always be the absolute last resort.
It is important that you fully understand the difference between debt settlement and consolidating your debts. Both of these are ways to free you completely from debt but in different ways. Debt settlement is a negotiation process where the main objective is to resolve and clear up all of the debt by getting creditors to agree to accept only a portion of what is owed.
You do need to have some cash to work with if you decide on this option but in many cases consumers are able to settle for less than half of the amount owed. This is done by making a settlement offer with the creditor that would be paid immediately to settle the debt.
A debt consolidation would entail bundling all of your current loans into one payment with a more attractive interest rate. So, instead of paying out monthly on multiple credit cards you would make only one payment and the amount would be lower. The benefits for debt settlement are that you are immediately relinquished from your debt but the bad news is that this will stay on your credit and will appear as exactly what it is, a debt settlement.
Your credit score will be lower, likely under 500 and if you need any type of loan you will have no alternative but to deal with a sub prime lender. The benefits of debt consolidation are that a consolidation company handles everything so you don’t have to. They will negotiate for you and you will pay them on a monthly basis. The down side of debt consolidation is that your payments can not be late and it is not likely that anyone will extend any credit to you during this process.
Every unique situation may call for a different approach. It is the best idea for you to examine your individual circumstances and see which is best for you.
Get free consultation today and save yourself from bankruptcy, foreclosure or other pressures of debt. Here are highly reputable sites for expert help..
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Chimezirim Odimba is a finance expert
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