When your financial situation is choked by debts, frustration
kicks in and one goes with the next available debt relief option. A few minutes
spent surfing the internet reveals that debt consolidation is one of the best
debt relief options because it promises lower interest rates and a big sigh
from multiple monthly debt payments. You will also come across debt settlement,
which cuts off creditors’ incessant calls to you. However, these two operate
very differently and if in a murky situation with no means of repaying debt,
debt settlement will suffice.
Debt consolidation
A debt consolidation loan plan involves taking a big loan to pay
off smaller debts at lower monthly interest rates. You’ll be expected to pay
off one monthly bill. However, your income, stability, credit score, and
security determine qualification.
You should take a debt consolidation loan when
looking for more affordable loan repayment terms as well easy management of
payments and reduction in late payment penalties. Most people who qualify for
debt consolidation loans afford their loan payments, but this isn’t the case in
debt settlement cases.
Debt settlement
A debt settlement plan, on the other hand, involves having a debt
settlement expert negotiating with your creditors for cancellation or reduction
of the balance owed. This has been seen to be more favorable to debtors who
cannot afford to repay their debt.
Debt settlement process
Debt settlement applies for debts like credit cards, personal
loans, private loans, utility bills, mortgage ‘short pay’ balances, medical
bills, car loans, and leases. The settlement process involves:
1. Your ability to repay the debt is ascertained from your living
conditions and your payment stub. Applicants who qualify for debt settlement
have a limited ability to repay their debts and in successful settlement cases,
they can walk away without paying a penny.
2. Negotiations with creditors include revelation of your true
financial status. Your credit will have to agree with getting as much or as
little as possible from the settlement.
3. When in agreement with the partial loan payment, an exchange
account is set up for lump-sum payments.
4. The agreed settlement will render the debt fully paid regardless
of the fact that it has only been repaid partially.
Which is the best debt settlement
company?
In the same way that you use online
debt consolidation reviews to determine the best debt consolidation
companies, online debt settlement reviews will guide you in finding the best
debt settlement companies. The best company does the following:
Gives
full disclosure:
The best debt settlement companies give settlement plans with
all fee details and associated costs. You will also receive a reliable estimate
of the number of months or years you will have to wait before clearing the
agreed lump sum in the exchange account.
Moreover, information on how much money you must have saved before
offers can be made to the creditors.
Easy
to understand policies:
Financial policies tend to be complicated
but a reliable debt settlement companies offer easily understandable debt
settlement programs.
Gives
you the last word:
Before finalizing all agreements, you will
receive all the settlement offers for final approval
When you have racked up too much debt, have insufficient income to
repay your debts, and your tanked credit score makes it impossible for you to
qualify for debt consolidation, debt consolidation is your best relief. The
payments may or may not affect your credit score. However, in extreme cases
where bankruptcy is the next option, your creditor may settle for so little or
nothing saving you the imminent financial pitfall. Since consolidation doesn’t
work when you are unable to repay your debt, debt settlement comes in to save
you.
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