PERSONAL FINANCE: Debt Settlement vs. Debt Consolidation
By Space Coast Daily // January 24, 2018
Lower Your Monthly Payments
Consolidation of debt could be a very good thing and it could be a very bad thing. All this depends on if you want it with a consumer mindset or an investor mindset.
When you are consolidating consumer debts, you are doing a really smart thing. But, if you are consolidating for business and investment debts that make you money, then maybe it is good.
Debt Settlement
However, in case of debt settlement, whenever you have debt that is of no use to you, such as, credit card maxed out, then settling the debt is the possible solution. Debt settlement is essentially where you get the lender to agree to accept the amount that is less than the total amount of the debt. It could result in a lump sum payment or a series of payments over time.
So, the significant difference between debt consolidation and debt settlement is that in debt settlement you do not have to pay back the entire debt. While in debt consolidation the debt relief companies will combine all your debts into one single loan at very low interest rates. It can be very beneficial as it will save your credit to suffer while you are paying the entire debt.
In debt settlement, a negotiation is made with your creditor to reduce the total amount of debt that you owe. The savings could be significant in this case.
Debt settlement is essentially where you get the lender to agree to accept the amount that is less than the total amount of the debt.
Depending upon the type of debt, the debt settlements could reduce the debt up to 60—80%. It is a viable option for the:
- Student loan debt.
- Credit card debt.
- Medical Debt.
- Small business debt.
- Second mortgage debt and etc.
Things to Consider While Choosing Debt Settlement
Hire a Law Firm
While considering debt settlement as an option, it is important to make sure that you are working with a law firm and not a debt relief company. Some creditors do not even talk to the debt settlement companies. But they do not have a choice when the customers hire an attorney.
When you hire a law firm, it not only permits but also requires the creditors to discuss the accounts with them. In addition to this, if in any case, your creditors sue you, then your debt settlement attorney can represent you.
Lower Your Monthly Payments
Debt settlement option also allows you to lower the number of your debt payments monthly. Other than the significant savings, the debt settlement can also be an affordable option. Most of the debt settlement firms will you 2-3 years of debt payment plan. Usually, the monthly payments are very less than the minimum payments that the client is already paying on his/ her credit card.
Become Debt Free
Debt is a big burden that can make you free paralyzed. It is, therefore, important to know even if you are feeling trapped; there are alternative options,and in a few years you can get back on your feet.
Make sure you consider your real financial situation and your goals for the future. Also, do proper research s you do for any other thing you buy. You should do the same thing regarding your financial future.
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