Difference between Debt Consolidation and Debt Settlement
When you can’t keep up with your monthly bill payments, you may choose either debt consolidation or debt settlement depending upon your financial situation. To decide upon debt consolidation or debt settlement, you need to understand how the 2 options work and what benefits you can get out of them.
Debt Settlement: Your current level of unsecured debt will be skillfully negotiated for you, and essentially you will end up paying a fraction of the debt. Generally, we estimate we can reduce your debt by 40% to 60% of the current total. Affordable monthly payment, are set which is determined on a client-by-client basis between you and a counselor. Based upon what you are able to pay each month into your settlement account, a counselor can determine how many months you will be part of the program, and ultimately be debt free. The process then repeats with each creditor until all the debts are paid off. Throughout the program, the counselor corresponds with your creditors, on your behalf, and you will no longer be dealing with burdensome phone calls and letters from your creditors. Upon enrollment counselors or debt settlement companies will inform each creditor immediately and individually that they are representing you, and also let them know of your interest in settling your debt with them. Reaching a settlement usually takes several phone calls and communication between Debt Settlement companies and the creditor. Once a settlement offer has been reached, and you as the client have agreed on this amount, you will pay the agreed upon amount from your settlement account. This is always done with your authorization, whether verbal or written. At that point, the creditor has accepted the payment in full, and you are free of overwhelming debt forever.
Debt Consolidation: Consolidating your debt is simply amalgamating everything you owe into one monthly payment. Debt consolidation is a great solution to your debt problem. No doubt the overall payment liability calculated over the long loan term will be much higher than your exiting situation, but this is the only alternative to the deteriorating debt problem. The biggest benefit overall is to lower the amount of money you pay. Most programs will consolidate all of your debts into one loan and will often lower the total amount owed. This will save you money in the long run as well as each month. This will also stop creditors from calling you every day asking for money you do not have. Debt consolidation helps you to lower down the total amount due; you can often get lower finance charges or interest rates. In some cases the interest will be waived altogether saving you a substantial amount of money. Once you have realized the error of your ways and want to right your wrongs, you can do so by committing to making one payment every month until your deficit is paid. This will help you to begin improving your crucial credit score. For most people, this is the ultimate solution.
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