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What Is Debt Consolidation?
Debt Solutions and Advice
Debt Consolidation is method of combining all of your unsecured debts. Whether it be medical bills, credit card bills, personal loans or other loans, they are combined into one monthly bill untill all of debts are paid off, which makes it more convenient and easier to eliminate your debt. This is a very effective way to attack debt but just know its a process that will seem slow and drawn out. Nevertheless its effective and gets you out of debt faster than you think.
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Debt Settlement is method used by debt relief agencies in which your debts are settled with your creditors for a lesser amount and is paid in one lump sum. Many go with this option because it puts a halt to all the collection calls and you only have to deal with one agency. In most cases only unsecured debt, such as credit cards and medical bills, is eligible for settlement. Some people choose the help of a debt agency but this can by done by an individual as well.
So most commonly, the debt settlement process starts out with an individual contacting a debt relief company. The agency usually will first ask you the consumer to stop making payments to the creditors. This is a tactic used because it leads the creditors to believe you are struggling financially if payments are continuously missed. In which case, the creditors are more likely to settle for a lesser amount. Keep in mind, while you have stopped making payments to the creditors, you will start making payments to the debt relief agency. This can be a strain for some consumers to have to make payments to the agencies but the idea is that you will be paying less in the long run.
Debt Settlment can provide some relief in the form of stopping the collection calls, because your creditors will be paid off. Usually with debt settlement, your debt is paid off much faster than with other methods.
Unfortunately there are alot cons using this method. There isn't much room for error. If you miss a few payments, you risk losing all the money that you have already given the agency and many of your creditors may go unpaid. You can pay as much as $2930 in fees per year according to TASC.