Some of the options that people can use to get financial help include debt settlement and consolidation. They are highlighted as viable solutions for people who are struggling to repay more debt than they can. While the terms are usually mentioned together, the reality is that these debt relief options have considerable differences.
Debt Settlement and Consolidation
Debt settlement negotiates with creditors in order to settle debts for a lower amount that what is actually owed. This is a method that is commonly used to settle large debts with one creditor but may also be used when dealing with more than one creditor.
Debt consolidation is an attempt to combine loans from different lenders and take out one loan to pay for all of them, ideally at lower interest rates and monthly payments. This is usually the option for consumers who are making an effort to keep up with multiple credit car bills and other unsecured loans. Choosing an option will depend on your circumstances and goals.
Process of Settling Debts
- The opportunity to pay a lower amount than what you owe makes settling debts an attractive option for getting rid of debt. Debt settlement works when you or someone who negotiates on your behalf makes an offer to the creditor to basically settle for less.
- Depending on what you owe, you can offer a lump-sum amount that is less than the original amount. If a creditor accepts your offer, the payment is made and this settles the matter. If you owe multiple creditors, you will need to negotiate settlements with each of them before you are completely out of debt. View debt settlement reviews
- It is essential to avoid debt traps that may arise from interest charges and expensive late fees. For anyone is overwhelmed by their financial situation but does not want to file bankruptcy, debt settlement may be the solution.
Handling Debt through Consolidation
If you can no longer deal with the large numbers of bills that you receive every month, you can consider debt consolidation. This is a suitable debt relief option of you can effectively control your expenses. One of the main sources of financial problems that consumers face is credit cards.
Credit card debt along with regular utility bills results in a tedious amount of accounting each month. If you are unable to keep up with a credit card, catching up can be quite challenging. When you reach the point of minimum payments on bills, debt consolidation may be the key to your financial freedom.
Simplify Payments and Cut down on Costs
Consolidating debts simplifies bill payments because you make a single payment to only one lender every month instead of several payments to several creditors with numerous deadlines. Debt consolidation also involves some savings when the new single loan has a reduced monthly payment and interest rate than what the bills you have consolidated would cost.
It is important to note that with debt consolidation, the debt is not reduced and you are still expected to pay back the total amount owed. To get the best results from debt consolidation, you should strive to increase payments while decreasing spending.
