A lot of people are having problems settling their credit card debts due to the current economic crisis. If you one of these people who are caught in this financial issue, one of the probable solutions you can consider is to seek professional help from debt management companies. These companies specialize is various cases of debts. You will be offered various solutions such as debt settlement and debt consolidation. Both may seem to be good solutions. However, it is important that you know the difference in order for you to come up with the best decision based on your case. Debt settlement Vs debt consolidation; which is more beneficial for you?
In both cases, the debt management firm will act as the third party between you and your creditor. In debt settlement, the firm will negotiate with your creditor to allow you to pay only a portion of your debt, say 50%. This is probably what you can settle for prior to bankruptcy. Most banks or creditors would agree to this since receiving a portion of what you owe them is better than no payment at all. However, you should have some cash ready since most banks usually allow only one-time or two-time payments. After settling the amount that has been negotiated, you are free from your debt.
Debt consolidation, on the other hand, is the process of consolidating your debts. The debt management firm will loan you an amount at a cheaper rate that will pay off your debts. It will also negotiate with your creditors to lower down the interests and finance charges of your debt. This will leave you with only one amount to settle per month or billing period. You will be free from several statements with different due dates making it easier for you to manage your budget. However, you have to make timely payments or you will be dropped from the program. The idea of paying only one bill per month with a lower interest rate is a big relief and convenience.
Debt Settlement vs. Debt Consolidation – which do you think is the most suitable solution that can address your debt issues?
