Debt Settlement Versus Debt Consolidation

Many people seeking financial freedom often turn to a debt settlement or debt consolidation program in order to assist them in their efforts to becoming debt free. These are both great programs that effectively help consumers to eliminate overwhelming debt. Although they may sound familiar by name, they are very different programs with contrasting criterias and procedures. Therefore, it is important for the consumer to evaluate their own needs and current financial situation in order to determine whether a debt settlement or debt consolidation program is better suited for them.

A common question is whether debt settlement is better than debt consolidation, or vise versa. The answer to this question truly depends on the consumer’s needs, concerns, and finances. Debt Settlement, a procedure where existing debt is settled for a lower amount, is most often better suited for people whom are seriously delinquent and are struggling to make even their minimum payments. This program will reduce the owed balance by 40 to 70 %, and will often have the consumer debt free within 6 months to 4 years. Debt Settlement is designed for those whom are 60 days or more delinquent on their debts, and those that are current should not expect to remain current on this program. As a result, credit scores may take a hit on a debt settlement program.

In contrast, a debt consolidation program will re pay the creditors in full within a few years by consolidating the debts into one monthly payment, often with lower interest rates. One monthly payment and lower interest rates ensure that more money is being applied to the principle balance every month, and therefore eliminating debt quicker. This program is best suited for consumers with higher interest rates, whom are still current on their debts, and are able to make a monthly payment that would be much higher than a monthly payment on a debt settlement program. Debt consolidation programs repay the entire debts in full while keeping the consumers current, thus preventing any negative impact on a consumer’s credit score.

Debt settlement versus debt consolidation is a dilemma that many consumers often face when evaluating options for seeking financial freedom. However, a consumer’s desired needs and current financial situation can help determine the best program for them, and get them to financial freedom in no time!