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Debt Settlement VS Debt Consolidation

Debt settlement and debt consolidation both are ways to clear off your debt but both are very different from each other. Debt settlement is a series of negotiations with your creditor to make your creditor accept less amount, usually a lump sum than originally owed. If these negotiations become successful then you can be debt-free in one go though these negotiations may take several months or years. In debt consolidation, you take a new loan, usually at a lower interest, to pay off all old loans, and then instead of paying multiple creditors, you pay this new loan in monthly payments. It is advised to hire a professional company while going for any of the above options.

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Debt Settlement VS Debt Consolidation

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  1. Debt Settlement VS Debt Consolidation According to a report by the website thebalance, the average credit card debt in New York is $8,510. This shows that residents of New York need ways to clear off their debt so that they can live a debt-free future. Many people trust debt settlement and debt consolidation to get rid of debt. Though, when exploring these options, most people get confused between them. In the article below, we have grouped all the differences and similarities that debt settlement and debt consolidation have. What is a Debt Settlement? Debt settlement helps you to get debt-free by paying less than what you owe Debt settlement is a process involving several steps of negotiations that clear off your debt at once. Usually, in debt settlement, you pay a lesser amount than you originally owe. Though debt settlement is an attractive choice to clear off your debt, not everyone qualifies for it. Creditors are under no obligation to enter negotiations offered by you. Especially, if creditors believe that you can pay the full amount of the debt, they are less likely to accept your offer.

  2. However, if the creditor believes that you will not be able to pay the loan, they accept your offer. Sometimes you can clear off your debt by paying only 60% of the original amount. Debt settlement negotiations take time. Negotiations can go on for months, sometimes, even years. In fact, stretching negotiations is one of the strategies to make your creditor accept your offer. It is advised to hire an experienced company to enter negotiations with your creditor for debt settlement. A reputed firm can even settle your debt at half of the original amount. There are many companies that provide personal debt settlement services. You can choose any debt settlement company in New York. The company must have a good reputation as reputed firms can provide you a better deal than others. What is Debt consolidation? Debt consolidation protects you from the headache of multiple debt repayments Debt consolidation is taking a new loan to pay off your all-old loans. Usually, the interest rate of this new loan is less than previous loans. Once you are free of all old loans, you only need to pay the new loan using monthly payments. Debt consolidation not only reduces your multiple creditors but can also reduce your monthly payments because of lower interest rates.

  3. However, finding a lender to provide you a consolidation loan is not an easy task. Especially if you are neck-deep in debt then finding a lender for debt consolidation can prove a tough task. Also, consolidation loans ask for security. Your asset secures them. Assets like a home, car, retirement policy etc. Security means if you fail to repay this new loan, your asset will be seized. Therefore, while going for debt consolidation, one must be aware of the long-term effects it can have. Especially, in case of failure of repayment of a new loan, it can be damaging. The time that debt consolidation takes depends on the amount of your new loan that you take. If you can pay the new loan in two years, then you are debt-free in two years. However, if it takes you ten then you may have to live in debt for the next ten years. You can take the help of some professional company for the task. From many options available in the market, you can choose any debt consolidation company in New York that provides personal debt consolidation services. Important points •Debt settlement and debt consolidation both are used to clear off your debt. However, they have a quite different process. •Debt settlement clears off your debt in one go but it usually takes several months or years to finalize negotiations. •Debt consolidation cuts down your multiple creditors into one. However, you need to find a lender who is ready to provide a new loan with lower interest. •In debt settlement, once your negotiations are finalized, you are debt-free. On the other hand, in debt consolidation, you are in debt till you pay off your new loan.

  4. •A new loan in debt consolidation needs security. If you fail to repay your loan, security will be seized. •Debt settlement can impact your credit score, sometimes severely which may hurt you in the future. Debt consolidation leaves no such impact. •It is advised to hire a professional company for debt settlement and debt consolidation. Debt settlement and debt consolidation terms sound similar. Therefore, these two terms often confuse people. However, it is clear from the above-stated facts that these two are quite different in application. The only similarity both possess is that they both are used to get out of the burden of debt.

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