Differences Between Debt Consolidation and Settlement



Are Debt Consolidation & Debt Settlement The Same Thing? While they both work to get you out of debt - they are in fact two distinctly different processes. Debt consolidation works to lower you interest rates by basically transferring your debts over to a new single loan with better interest. A popular alternative to consolidation is known as debt settlement or debt negotiation, which works by actually reducing what you owe to creditors. With debt settlement, a third party negotiates with your creditors on your behalf to reduce what you actually owe in balances. It works similarly to debt consolidation, but the company that arranges the settlement does not 'buy' your debt, they just negotiate better payment terms and interest rates - then collect money on your behalf to divide up amongst your outstanding creditors. Certain companies and organizations will offer both services. Debt consolidation loans usually call for collateral (a good option for homeowners), whereas debt management services can often be acquired with little or no collateral. It should be noted that you will get a better rate if you have collateral. Some good advice is to shop around and see what solution is best suited for you. Go with whoever can get you the lowest monthly payments and best payment terms. It may not always be the same company, depending on your situation and what options are available to you. Most companies are happy to give you more information and/or no-obligation quotes online so you can compare which company works best for you. Why Would Creditors Take Less? Every year in the United States, over one million individuals file for bankruptcy. Excluding chapter 13 bankruptcies, an individual struggling with debt that goes bankrupt is absolved from their debts. So, if a creditor is owed money by someone that may go bankrupt, the choice is generally partial or lower payments through a settlement, or, if they go bankrupt, nothing. So basically, debt settlement works in favor of the creditor and the person owing money; The creditor is not going to get full payment(s), but they can at least get something instead of nothing. The person in debt can restore their credit rating and avoid the hardships of bankruptcy by making lower payments agreed upon. The company/organization which takes care of the negotiations usually also earns a little off the new arrangements, but that's not normally a concern to those in debt, as long as it means lower monthly payments for them.	Consolidation Help: About Debt Consolidation Settlement Versus Consolidation The Process of Consolidating Consolidation Types: Consolidating Your Bills "Credit Card Consolidation" Unsecured Loans Secured Loans Other Information: Financial Management Tips Other Sites Debt Consolidation Loans - Home Guide To Debt Help Fill in a quick form with some details about your debts, and we'll match you with companies that best meet your needs. Care One Credit Counselling An industry leading debt management program provider pairing consumers with non-profit credit counseling agencies (CCAs). Get Debt Relief Now DRN provides leading settlement services to those with all types of debt. Avoid bankruptcy and get back on your feet.

Are Debt Consolidation & Debt Settlement The Same Thing?

While they both work to get you out of debt - they are in fact two distinctly different processes. Debt consolidation works to lower you interest rates by basically transferring your debts over to a new single loan with better interest. A popular alternative to consolidation is known as debt settlement or debt negotiation, which works by actually reducing what you owe to creditors.

With debt settlement, a third party negotiates with your creditors on your behalf to reduce what you actually owe in balances. It works similarly to debt consolidation, but the company that arranges the settlement does not 'buy' your debt, they just negotiate better payment terms and interest rates - then collect money on your behalf to divide up amongst your outstanding creditors.

Certain companies and organizations will offer both services. Debt consolidation loans usually call for collateral (a good option for homeowners), whereas debt management services can often be acquired with little or no collateral. It should be noted that you will get a better rate if you have collateral.

Some good advice is to shop around and see what solution is best suited for you. Go with whoever can get you the lowest monthly payments and best payment terms. It may not always be the same company, depending on your situation and what options are available to you. Most companies are happy to give you more information and/or no-obligation quotes online so you can compare which company works best for you.

Why Would Creditors Take Less?

Every year in the United States, over one million individuals file for bankruptcy. Excluding chapter 13 bankruptcies, an individual struggling with debt that goes bankrupt is absolved from their debts. So, if a creditor is owed money by someone that may go bankrupt, the choice is generally partial or lower payments through a settlement, or, if they go bankrupt, nothing.

So basically, debt settlement works in favor of the creditor and the person owing money;

The creditor is not going to get full payment(s), but they can at least get something instead of nothing.
The person in debt can restore their credit rating and avoid the hardships of bankruptcy by making lower payments agreed upon.

The company/organization which takes care of the negotiations usually also earns a little off the new arrangements, but that's not normally a concern to those in debt, as long as it means lower monthly payments for them.

Consolidation Help:

Consolidation Types:

Other Information:

Guide To Debt Help
Fill in a quick form with some details about your debts, and we'll match you with companies that best meet your needs.

Care One Credit Counselling
An industry leading debt management program provider pairing consumers with non-profit credit counseling agencies (CCAs).

Get Debt Relief Now
DRN provides leading settlement services to those with all types of debt. Avoid bankruptcy and get back on your feet.