There are Differences
When people think about debt consolidation and debt settlement, some
think that the terms are interchangeable, which they most certainly are
not. They are two very different concepts and ways of dealing with your
debt – and knowing the difference is very important.
Debt consolidation is the idea that you pay off what you owe, only in
one loan instead of from several different sources. You essentially take
all of your debt from your medical bills, credit cards, whatever, and
get one loan for the amount that you currently owe. This debt
consolidation will then allow you to get a lower interest rate and a
lower monthly payment.
Debt settlement is the idea that you negotiate with each of your
creditors to pay back a portion of what you owe. You don’t pay them back
everything, only part of the amount that you borrowed. The biggest
problem with this that most people don’t realize is that if you are in a
position to pay them back you should, because settlement is a black mark
on your credit score.
Settlement is along the lines of bankruptcy in as far as the credit
reporting companies are concerned. They see it that you did not pay back
a debt that you owe, even though you paid back part of it. With debt
consolidation there is no black mark because you have simply paid off
debt that you already had, not taken on more.
Either way, if you are in over your head and need assistance with paying
off your debt – you will need to find a way to get help. Both debt
consolidation and settlement will help you get your life back after
taking on too much debt and will get you closer to having a debt free
lifestyle.
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