What is the difference between debt consolidation and debt settlement? Normally when people are in debt they often look to a strategy to help them reduce the amount of debt that they are so that they can have a little breathing space in their life.
Two of the main strategy people use in solving the Debt problem is with the Debt consolidation and debt settlement. However many people do not know what the difference is. This is why we are taking a look at today the difference between debt settlement and debt consolidation.
It is very important that you can settle your debt as quickly as possible so that it does not affect your financial life in the long run. The more your debt persists the more your credit score takes a tooth that is why you need to take all the adequate steps necessary to expunge all debt. One of such way is knowing the difference between debt settlement and debt consolidation.
What is Debt Consolidation?
One of the methods in which people used in coming out of that depth problem is by going for the death consolidation plan. In debt consolidation, all your debt are joined together into one so that instead of you focusing on paying multiple depths each month you can focus on paying that single one. This will help me not to miss any more payments and allows me to easily focus on carrying out the debt easily.
Anybody owing debt can go for a consolidation loan from a bank credit union or any other online lender that are willing to give them payments. The very importance of this consolidation debt is the fact that it helps you psychologically by relieving the stress of you keeping up with various debt which is why all debt are consolidated into one. Which can allow me to focus on paying it back easily.
What Debt Settlement?
Just as the name suggests debt settlement is another way that people use in paying back or their debts. Debt settlement is totally the opposite of a Debt consolidation loan or plan. Debt settlement involves the debt of negotiating with the creditor so that they can pay a lower amount for the debt that they are owing. If the creditor agrees then Delta simply places an agreed amount lower than the amount they owe.
This is one of the best ways many people used in settling their debt because they do not have to pay the debt in full. Many times this method is usually better than going for the consolidation plan. However, it is up to your creditor to determine if they are going to be interested in giving you a reduced amount for you to pay. That is not all because you also need to have cash in hand to settle the debt.
What is the Difference Between Debt Consolidation and Debt Settlement?
Now that we have seen what debt consolidation and debt settlement are now let’s take a look at the differences between the two of them. Because as you can see from the definition above they both are totally opposite ways to settle your debt.
- The first difference is that debt consolidation reduces the numbers of debt that you owe by combining them into one. While debt settlement simply lowers the amount of debt that you owe.
- For a debt consolidation, you might have to pay alone original fee for the consolidation plan but in debt settlement, you are expected to pay 15 to 20% of the total amount of debt you have as a fee.
- Debt consolidation generally helps you get a lower interest rate on your debt however debt settlement reduces the total amount you pay.
- Debt consolidation does not eliminate your original debt however in debt settlement loan debt is reduced.
These are some of the differences between debt consolidation and debt settlement which are basically two opposite things as you can see from the above.
When Should you Choose Debt Consolidation?
Trust me on this when I tell you that the Debt consolidation plan is not from anybody there are some specific scenarios where this is interesting. Below I have listed some of the circumstances where the consolidation plan makes sense:
- When you have too much debt and you are looking to simplify them all into one.
- Anyone that is looking to get a lower interest rate on their loan so that they can focus on paying it off.
- You are also ready to make a plan to pay off your debt because even if you consolidate them if you do not have the plan to pay back you will still owe more debts.
When should you Choose Debt Settlement?
Debt settlement is also another way to eliminate that from your financial life and if you are considering this it makes sense to go for it if the below circumstances is true for you:
- When you are out of options and will not qualify for an interest debt consolidation loan then you can simply Go for debt settlement.
- If your last resort is going to declare bankruptcy then you should definitely try this method before doing so.
- Anyone willing to take a hit on your credit score because they are debt has become so large can go for debt settlement.
These as some of the circumstances where you can either go for debt consolidation or debt settlement.
Is it better to consolidate debt or settle it?
About I have listed some of the circumstances where you can either go for Debt consolidation or debt settlement. In the settlement, you are reducing the total amount of loan you are going to pay which is a good thing why in consolidation you are combining all your debt into one which is also a good thing so that you can focus on paying them off her ever it is totally up to you to choose.
Are debt settlement and debt consolidation the same thing?
The answer is no they are basically two different things in fact they are almost like two opposites but they are both ways in which you can use incoming out of owing. In settlements, you can reduce the total amount of debt that you owe ya consolidation you are basically joining them to become one so that you can focus on paying them off.
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