Compare Debt Settlement vs Debt Consolidation

Is one solution better than the other?

An explanation on the debt consolidation program

Debt Consolidation is the procedure to which you consolidate your debt, into one easy payment. This program is often for those whom are current or semi-current on their credit card debts. Obtaining one monthly payment, a lower interest rate and becoming debt free in a few short years is one of the key benefits to debt consolidation. When comparing these debt relief programs, remember that debt consolidation is not factored into the consumers credit score. When going through a nonprofit provider, the creditors are more willing to work in lowering the minimum payments and interest as opposed to doing it on your own. When enrolling into a consolidation program, the accounts remain in a current status as if you were staying current on the bills. Since the debts remain active and the balances go untouched, this explains why the program is not determined when calculating a consumers credit score.

When enrolling into a consolidation program, the consumer will have the ability to setup the payment date for any date they wish. All minimum payments are done through a checking or savings account to ensure that payments are done on time. This program was designed primarily for consumers whom have interest rates a 12% or higher.

If a consumer is making minimum payments and feel as if the balances are not going down, debt consolidation may be in the best interest of that consumer. As previously explained, the consolidation program is designed primarily for those whom are active on credit card debt.

Here are a few key benefits to debt consolidation

• One monthly payment.
• Reduced monthly payments.
• Reduced interest rates.
• Reduced or eliminate fees and charges.
• Not factored into the consumers credit score.
• Debt freedom in months, not years.
• Designed for consumers whom are current, or no later than 90 days delinquent
  

Debt Settlement

Debt Settlement is the procedure to which consumers settle on an already existing balance. The settlement program is often for people whom are seriously delinquent or for those who cannot maintain anymore minimum payments. Debt Settlement, does impact the consumers credit score as they purposely fall behind in order to obtain the best settlements. Remember, this is not a program that keeps accounts current like debt consolidation. If consumers are willing to take a ding on their credit, debt settlement may be beneficial for that client. This program is also designed for those whom have debts, years past due that are looking to clean up their credit. When looking at the differences between debt settlement vs debt consolidation, it's important to know that consolidation keeps accounts current whereas settlement does not.

This option is an excellent way to go about resolving debt should the debts be old medical or collection bills. Most debts that are seriously delinquent may benefit by this program. For consumers that are current on minimum payments, do expect to fall behind. To qualify for this type of program, a consumer must have at least $5,000 in combined debt.

Here are a few key benefits to debt settlement

• One monthly payment (much lower than debt consolidation)
• Reduce the balance by 50 to 70%
• Reduce or eliminate fees and charges
• Debt freedom in 6 months to 4 years.
• Designed for those whom are 60 days or more delinquent on their debts.

When trying to cross compare settlement consolidation, although they may sound familiar they are not. Remember that settlement is primarily for people whom are delinquent or want to resolve debts on a credit report, whereas consolidation is for those whom are current on active credit card debt just looking to lower minimum payments and interest rates.

Additional resources:

• Starting the debt consolidation process.
• Nonprofit debt consolidation