What Is The Difference Between Debt Consolidation And Debt Settlement?

The Difference Between Debt Consolidation and Debt Settlement

Debt consolidation and debt settlement were created to help those struggling with credit card debt. However, if you’re planning on using either one to help you with your credit card debt, you need to know the differences between the two. The biggest difference is that debt settlement typically has a negative effect on your credit score and produces a blemish on your credit report that could prevent you from getting a loan in the future. Debt consolidation, on the other hand, does not impact your credit score nearly as much. That said, both can help you save money; they just both do it in different ways.

The Benefits Of Debt Consolidation

Debt consolidation is probably the more popular choice. It’s not because it’s better, though; it’s because debt consolidation is open to more consumers. While debt settlement is usually only available to those that are truly suffering with credit card debt, debt consolidation is a good way for you to restructure your credit card debt and pay it off more effectively. Debt consolidation brings all the debt you owe together on multiple credit cards and puts it into one giant pile of debt that you can work on paying off. By doing this, you’ll usually receive a much lower interest rate and you’ll only have to make one monthly payment. It’s important to remember that with debt consolidation you’ll still be paying off all your debt. You’ll just be doing it more effectively.

The Benefits Of Debt Settlement

While debt consolidation helps you to pay off your debt over time, debt settlement helps you do it immediately. If you’ve found yourself getting more and more behind on credit card payments and are even considering bankruptcy, your credit card company may be willing to settle your debt with you. By doing this, you’d only be required to pay off a percentage of your debt in order to clear your balance. However, often times, a creditor will note this on your credit report. It could also result in a lower credit score. However, you will be paying off the balance of your credit card debt and avoiding future trouble with debt.

Both debt consolidation and debt settlement can help consumers get out of debt. It just depends on which option works best with your present situation.

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1. If You Make A Reduced Settlement With A Credit Card Is The Difference Reported To The IRS As Income?
2. What Is The Difference Between Debt Settlement And Debt Consolidation?
3. How Will Debt Settlement Affect My Credit Report?
4. How Bad Is Debt Settlement On Your Credit Report? How Many Points?
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