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Debt Settlement Vs Debt Consolidation – Which Option is Right for You?
Are creditors hounding you day and night for money you don’t have? Are you looking for a way to pay down debt and raise your credit score? No matter why you want to eliminate or lessen your debt, there are different ways to do so. Two of the most common methods used are debt settlement and consolidation. Looking at the different between debt settlement vs. debt consolidation can help you determine which method would work best in your situation.
The Pros and Cons of Debt Settlement
With debt settlement you can have a portion of the debt you owe completely erased or eliminated. This amount can often be up to 50 percent or more, depending on the amount and age of your debt with the collection agency. This is an extremely effective method when you have the extra money to pay down debt and when you are able to make the settlement payment on the spot.
However, if you do not have the means to make the payments right away, then the settlement offer will be rescinded and you may not get another chance to settle at that low rate again. This is one of the main differences when it comes to debt settlement vs. debt consolidation. This method allows you to be done with that specific monthly payment once and for all and instead of recurring late payments on your credit you are able to start building good credit once again.
The Pros and Cons of Debt Consolidation
Debt consolidation can also be a wonderful way to reduce your debt and keep your head above water. With this method, you also get a lower rate on your current debts, but you are not required to pay them off all at once. Instead, a consolidation company will negotiate the lower rates for you and you will make one set monthly payment to this company each month. They deal with all of the fees and hassles and you can pay off debt in as little as five years or so.
If you are comparing debt settlement to debt consolidation, it is important to understand that consolidation will not have as good of an effect on your credit as settlement. Lenders will see that your debts still exist during this time and may still refuse you credit. You also have to avoid consolidation company scams and be sure that the company you are working with is in fact paying the creditors.
Which Option is Right for You?
Both forms of debt management and elimination listed above are good ways to help get out of debt for good and improve your credit worthiness. Determining which one is right for you can be a bit tricky. It is important to look at all of the aspects of debt settlement vs. debt consolidation to make the right decision. If you have money for debt settlement upfront and need and instant boost to your credit then settlement could be the way to go.
If you lack upfront funds however, you may need the help of a consolidation company which will allow you to make monthly payments. Weighing your options carefully will ensure that you make the choice that is best for you.
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