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Which is a Better Option - Debt Consolidation Or Debt Settlement?
By Hector Milla
There are some major differences between consolidation and settlement. It is important to know the differences before making a final decision on how to handle your debt situation. A debt consolidation loan will combine all debt and offer one monthly payment. Usually, the payment will be lower than your usual combined monthly payments. This is because the consolidation company has agreements with credit card companies, allowing them to get a lower interest rate on the loan. Since the payments will be lower, this can save a lot of money each month.
The consolidation option is a good choice for people who have high interest rates on credit cards. When an individual applies for a consolidation loan, they must cancel all credit cards that will be included in the loan. This will help in the prevention of incurring more debt.
A debt settlement is for those who cannot make the required payments of their combined debt or the amount of a consolidation loan. A settlement is also used by individuals who have not made consolidation loan payments in three or more months.
With a settlement, the company will work with creditors to get the lowest payoff. The final figure is usually about 40 to 50% of the debt. While the settlement company is negotiating, the individual must make monthly payments into an account. This money will be used to pay off the amount that is agreed upon by the creditor.
People with debt will usually opt for a consolidation loan first. This will allow them to pay off debt while saving money each month. These loans can be for many years, but the end result is a better credit rating with no existing debt. Debt settlement is typically a last resort for individuals who cannot make their monthly payments, or for those who have tried a consolidation loan and still cannot afford the monthly amount.
By the way, by researching and comparing the best debt consolidation companies in the market, you will be able to determine the one that meet your specific financial situation, plus the cheaper interest rates offered. Nonetheless, it is advisable going with a trusted and reputable debt counselor before making any decision, this way you will save time through specialized advise coming from a seasoned debt advisor and money by getting better results in a shorter span of time.
Hector Milla runs the Best Debt Consolidation Company website - where you can see his best rated debt consolidation company recommendation.
Visit for further information and read our full review of the best debt consolidation service, plus articles and video training about how to get the most of your debt consolidation process.
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