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Saturday, 31 December 2011
Debt Settlement and Debt Consolidation - What's the Difference?
Let's talk about the differences between these two basic deft relief programs, debt settlement and debt consolidation and what some of the advantages and disadvantages may be for you. Debt settlement or debt negotiation is a credit counseling option that can save a considerable amount of money over paying the balances back in full. By way of debt settlement, a debt relief company can get your creditors to reduce your debt by a negotiated amount. Once you have paid the agreed-to amount, you are legally out of debt. Debt consolidation is a creditor sponsored program to help people pay back their balances in full plus interest.
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There are some key differences between debt consolidation and debt settlement. In debt settlement, the debt negotiators mediate with the creditors/collectors to reduce the outstanding balance. In debt consolidation, the counselors convince your creditors/collectors to reduce the interest rates on the loans. Once, you pay off the debts through consolidation, the account status will updated as "Paid in Full" on your credit report. But in debt settlement, your account status will be updated as "Paid as Agreed" after the payment of debts.
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