Is it Better to
Go Debt Consolidation Over Settlement?
It can be tough to know what to do when you have a lot of debt.
You will hear terms like debt consolidation or debt settlement
and you probably won’t know which way to go. So how do you
decide which one is right for your particular situation?
Debt settlement is the process of paying back only part of what
you owe a company. If you owe $10K on a credit card and you pay
back $5K, you have settled with the company for a lesser amount
– thus “settled” with them. This does two things – one, it
allows you to pay off your debt faster and for a lower monthly
rate, and two, it gets you out of debt faster. However, it can
also affect your credit in a negative manner. If you work with a
company try to get them to report the debt as “paid in full” not
“settled” as the former will give you a positive credit rating
and the latter is more akin to the rating you would get if you
declared bankruptcy.
On the other hand, debt consolidation is taking all of your
bills and compiling them into one loan. You pay off all of your
debts with the money from the debt consolidation, then you pay
off the debt consolidation itself. This is great if you have too
many bills to keep track of, or if you simply want a lower
monthly payment. The larger loan will save you tons in the
process.
If you are able to pay back your bills, you are going to want to
get the debt consolidation. However, if you know that you are
not going to be able to make that monthly payment even with a
debt consolidation, then you should probably look into a
settlement instead.
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