When it comes to managing debt, there are several strategies available. Two of the most popular are debt consolidation and debt settlement.
Debt consolidation involves taking out a loan (either a personal or home equity loan) and using it to pay off other debts, creating one payment at a lower interest rate. Debt settlement involves negotiating with creditors to pay less than what is owed.
Loan Consolidation
A debt consolidation loan from companies like Symple Lending allows you to consolidate multiple debts into one payment. The new loan could have a lower APR than your existing debts or a shorter loan term.
A lower interest rate can help you save money over time, while a shorter loan term will reduce your cumulative interest payments. You must, however, be able to pay the monthly payment on your consolidation loan. Otherwise, it won’t help.
If you pay your monthly bills on time, debt consolidation will not negatively affect you. By reducing the credit utilization ratio, consolidating debts into one charge can help improve your credit rating. The larger payment may also be easier for some borrowers to manage.
Debt Settlement
Debt settlement involves convincing companies to forgive at least a portion of the debt you owe them. You can do this on your own or enlist the help of a debt settlement company. This approach comes with many risks, including the chance that a creditor may agree to accept less than what is owed. In addition, settling debt can damage your credit score more than debt consolidation does.
Debt settlement also requires enough income to afford the new monthly payment. In addition, there are upfront fees associated with a debt settlement, such as the loan origination fee (typically 3%-5% of the total borrowed amount), interest charges and any applicable late payment fees. It is important to consider the pros and cons of debt settlement before deciding. Before proceeding, consult a reputable nonprofit credit counselor or a debt lawyer. They can provide advice based on your specific financial situation and goals.
Credit Counseling
Credit counseling organizations help you learn how to manage your money and make payments consistently. They may work with you to create a repayment plan; some can even negotiate lower interest rates on your debt. However, they do not typically reduce the amount you owe or remove late fees and penalties from your account. It’s important to consider all of the pros and cons of a debt management plan before choosing it.
On the other hand, debt settlement companies, including companies like Symple Lending, often help you settle your debts for less than what you owe. You can also have them negotiate with your creditors to stop debt collection. It’s important to know that debt collectors and creditors may not accept settlement offers from the company you hire.
The debt settlement process can damage your credit rating and may take 3-5 years. Your creditors may take more serious action against you if they see you as a high-risk person.
Conclusion
Programs for debt consolidation and settlement may lower the amount you pay and the time it takes to pay off your debts. These two solutions have certain variations; the best option depends on your financial condition.
Debt settlement is a conversation to resolve your credit card debts for less than what you currently owe. Paying your bills on time can reduce your balance by up to 50%. However, this approach may harm your credit score, and you may be compelled to cease making payments.
Debt consolidation is a means to combine several loans into one, making it easier to manage your accounts and make payments in cash. You must have strong to excellent credit to qualify for a balance transfer card or debt consolidation loan. These loans also have costs and requirements. These loans also come with fees and conditions. A certified credit counselor can help you manage your finances by implementing a debt management plan.
