Don't Confuse Debt Settlement and Debt Consolidation

Don't Confuse Debt Settlement and Debt Consolidation
By Christina Costa

There is a very simple philosophy behind debt settlement. If
you are able to lower the amount you owe, you will be able to
pay off that balance even faster.This is a process you can do on
your own, but think about it do you really want to try and
negotiate with all of your creditors?

A reputable debt settlement company can work on your behalf.
Wouldn't you rather sit back and let the professionals take
over? I would. Especially with something as important as your
finances, credit and overall future! This is a tough time for
many Americans right now and more and more are falling deeper
into debt. There has to be a breaking point, where its time to
get out of debt and find some relief.

So let's take a look at debt settlement and then why it gets
confused with debt consolidation. Yes, they both can provide you
with debt relief but not in the same way. Debt settlement or
negotiation is the process of talking to your creditors in hopes
they will settle to a lower balance than what you owe.

This can happen by removing some of your late fees or lowering
(or possibly removing) your interest rate.

Most creditors will agree to this idea if you show signs of
struggle when it comes to paying them monthly. If they are not
getting anything from you, or hardly anything and its late they
might fear that you will run towards bankruptcy with open arms.
If that happens or they have to take you to court, the odds of
them getting their full balance is shot anyway.

So what are the benefits to choosing a debt settlement company?
First of all, debt settlement is going to be your least
expensive choice when looking for debt relief. Some feel that
bankruptcy is the cheapest alternative, yet remember the damage
you will be doing to your credit for the next seven to ten
years. I think debt settlement should be your last resort before
filing for bankruptcy.

Debt settlement is often confused with debt consolidation or
thought to be one in the same. That is definitely not true.
These are two different forms of debt relief. Debt consolidation
is when you take out one loan and use that to pay off multiple
other accounts.

Take into consideration if you are already having trouble
paying bills your credit has taken a hit. This would result in a
debt consolidation loan with a high interest rate. This type of
debt relief is usually only a good idea for those who are in
good to excellent credit standing.

Debt settlement on the other hand is working with your
creditors to reduce the balances you owe. This is a quicker
method to getting you out of debt, because you are not taking
out an extra loan to do it. A good debt settlement program can
take anywhere from two to four years to complete. This depends
on the individual and how much extra you can pay each month
towards the monthly payment.

Here is where most people learn how important it is to pay your
bills on time and what they can do to prevent falling back into
this situation. Once you are in a debt settlement program with a
reputable company, then you will make just one payment towards
all of your reduced debts. I think that is where the confusion
comes between debt settlement and consolidation. You eventually
will make one payment; it’s the process that gets you there that
is completely different.

One reason debt settlement programs do not work is usually
dependent on the client. If you sign up with a reputable company
then you should have minimal work to do. It's important to note
that once you enroll in this type of program, your credit might
get worse before better. Yet, if you weigh the pros and cons of
filing for bankruptcy, this is a much safer choice. Ask if your
prospective company offers credit repair services, most will
once the debt settlement is finished.

Debt consolidation is still a way to get some debt relief, but
I think that debt settlement is the wisest choice you can make.
Especially if you are tired of fighting an uphill battle towards
your late fees and interest. Isn't it time that you start
winning the war with your finances?

About the Author: Christina Costa, a freelance writer,
recommends for debt relief where you
can receive help with all of your credit repair needs in
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