When you are in serious debt, it can seem as though no one’s on your side. You may be looking for debt relief services but they may all look very confusing. What is the difference in debt relief services of debt consolidation versus debt settlement? Which one is more right for you? As we look into these two somewhat similar forms of debt resolution you can then choose from the best debt relief services who offer either.Debt Consolidation: When you are understanding how debt relief services work it’s important to know just what debt consolidation means. When you engage in debt consolidation you are taking out a single loan to pay down all of your outstanding debts. Debt consolidators negotiate a better interest rate on your credit cards, make payments every month to the credit cards, and then receive a single payment from you until that lower interest rate loan is paid off. A credit card (especially a delinquent one) or overdraft loan is going to carry a much higher interest rate than a debt consolidation loan does. By choosing a debt consolidator your accounts are generally frozen from regular use; however the accounts will generally remain “open” as you pay down your debts. So long as you make all your payments to your debt consolidator you will be done with your debts. Depending on the size of your debts this is handled for anywhere from one to a couple of years to 60 months or longer.
Debt Settlement: Another type of debt relief is debt settlement. Debt settlement is where the debtor and the creditor will agree on a reduced amount to pay off the credit owed. This is called a full and final settlement. Because most consumers don’t have much experience in handling this type of arrangement debt relief services are brought in to handle the details. They will take their fee off the top of this even though the debtor is still getting a better “deal” on the amount owed. Moreover when you do cobble together all of your credit cards and outstanding debts into this single loan your cards are closed so that you cannot use the credit accounts anymore.
Debt settlement and debt consolidation are both good ends for different clients. When you are working with your debt relief services you should make sure that you have chosen the right program for your needs.