Debt Consolidation vs. Debt Setttlement
When choosing between debt settlement and debt consolidation, there are several factors to consider.
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Definition
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With consolidation, multiple debts are rolled into one single monthly payment either through a loan or a debt management plan. Settlement is the process of negotiating with creditors to pay less than what is owed.
Advantages of Consolidation
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With consolidation, your monthly payment is lowered, interest is reduced and fees are waived.
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Disadvantages of Consolidation
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If debts are consolidated through a debt management plan, this can be damaging to credit scores and there is often a fee associated with these types of plans.
Advantages of Settlement
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Debt settlement allows you to pay less than you owe and get out of debt more quickly.
Disadvantages of Settlement
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Settlement requires that you stop paying on your debts, resulting in serious delinquency, continued collection efforts and damage to your credit.
Which Is Better
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Consolidation is better for those who need to make their monthly payments more manageable. Settlement is more advantageous for those who are severely delinquent and carrying higher debt loads.
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References
- Photo Credit Image by Flickr.com, courtesy of Andres Rueda
