Seeking out a debt relief can often feel like a scary and lonely process. You’re far from being alone; many people are in the same boat as you. The good news is there’re debt settlement companies out there looking out for your best interest.
I know that might be hard to believe. With a simple Google search, you’ll find several companies all clamoring for your attention (and your money).
Every debt settlement company is a business, and they all need to make money too. However, there’re ones out there who are sincerely looking out for your needs and your best interest.
Before we get to that, the big question regarding your family’s finances and individual situation are: Do I need to settle my debts, or do I need to consolidate my debts?
The most obvious positive aspect of either settling or consolidating is you can avoid bankruptcy and repossession of your home, car, or other things you hold dear and depend on. But thinking out a strategy is your first move.
Debt Settlement
With debt settlement, you’re not replacing your current debt with a new loan. Instead, reaching a settlement involves a series of negotiations between the debt relief company you have chosen to represent you and your current creditors.
The process often goes far beyond one round of talks. In fact, if your representatives at the debt relief company are smart, they’ll use the strategy of prolonging the settlement negotiation process as much as possible to make your creditors eventually cave to their demands.
The goal is to reach an agreement that allows you to pay off a lower amount than your current balance, usually in a single lump-sum payment.
Your creditors have every right to refuse to negotiate and reject any offer you give them. This is particularly important when choosing a debt relief company. There’re companies out there that creditors are warier of than others.
Furthermore, it’s typically possible to pay off substantially less than the amount you currently owe if the creditor believes it’s their best chance to recover as much of the money as possible from you. Though it’s true bankruptcy costs you money, it also costs them money and is something they’d like to avoid if possible.
Expect your account with the credit card company or whatever lender it is closed permanently after the settlement is made. It’s doubtful the creditor will not want to continue to grant you credit once all is said and done.
It’s also important to point out your credit score may have a negative impact on a settlement. It may be hard to receive approval for credit in the future. Still, the prospect of a clean slate and getting out from under the crushing weight of debt is enough for most to take these risks.
Debt Consolidation
With debt consolidation, you take out a single loan that consolidates and replaces all of your existing debts into one monthly payment. The monthly payment and interest should be lower than your current ones.
However, if your agreement involves an extended repayment plan, this can cut into your savings over time. Ensure you consider the long-term costs of consolidating.
For some, the benefits of getting creditors off your back and having a simplified and steady monthly payment are enough to decide on a consolidation strategy. However, unlike credit card loans, which are unsecured, most consolidation loans are secured with one of your assets. Make sure you’re comfortable with putting up this kind of collateral.
Weighing the pros and cons of and deciding on debt settlement vs. debt consolidation is not an easy task and shouldn’t be taken lightly. In any case, you don’t have to go it alone.
Choose a debt relief offering a free debt evaluation so you can make sure they’re the right fit for you. Here’re things that can negatively affect your debt consolidation loan.
