What is Debt Settlement? How is Debt Settlement different than a consolidation loan?
Posted September 7th, 2010 in Debt Settlement.
How to go bankrupt: no bull advice on when and how to file, online bankruptcies, alternatives, tips, do-it-yourself with a low-cost attorney review.
Debt settlement is the process in which you stop paying your creditors for some time and save that money so that you can then negotiate with them to settle the debt for a lesser amount.
But debt consolidation doesn’t reduce your debt; it merely eliminates multiple high interest rates associated with debt from various lenders. A debt consolidation loan is one viable solution to consolidating your debt. In this situation, you basically get a loan to pay off all your various debt or get a better type of loan
September 7th, 2010 at 9:30 amDebt Settlement is a method of negotiating an agreed upon payoff amount with your creditors that could be a fraction of your balance. Debt Settlement will save you thousands of dollars and years of repayment.
With a consolidation loan, you will group together all of your unsecured debts under one loan. Instead of making multiple payments to various creditors, you only have to make one payment to your loan consolidation company. You may be able to get a lower interest rate and a lower monthly payment with a consolidation loan but this is not always the case. You will still pay back the entire balance of your debts but it typically takes 7-10 years to do so. Debt settlement is not a loan. It is an agreed upon payoff amount that could be a fraction of your current balance. You typically cannot finance a settlement payoff. With most Debt Settlement programs, you will rectify your debt in a much shorter time frame.
September 7th, 2010 at 9:30 amDebt consolidation combines all loans to one single payment while debt settlement is negotiating with creditors and reducing repayment amounts and working out convenient repayment schedules for these loans.
Debt consolidation helps to revive your credit score when your start repaying the consolidated loan on time by reporting to the credit bureaus about your timely repayment efforts. On the other hand, a debt settlement usually lowers your credit score for the period you opt for a debt negotiation.
September 7th, 2010 at 9:30 am“Debt consolidation” can refer to two completely different things: Getting a loan to pay off all debts to consolidate your bills into one lower payment. If you do this, go through a local bank. Debt consolidation also refers to a risky practice of deliberately defaulting on your credit cards to try to force your creditors to settle for less.
Stay away from any "debt consolidation" company that promises to cut your debt and payments in half through debt settlement….This is a risky tactic of deliberately ceasing all payments to creditors and forcing your accounts into default to attempt settlements. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator’s fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating for sure. Debt settlement is like a roll off the dice with your finances…You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.
Many people who sign up with “debt consolidation” firms incorrectly assume that they have the power to force your creditors to accept settlements…they don’t. Your creditors have the right to refuse settlements and take you to court.
See this as an example of what can go wrong with debt settlement:
September 7th, 2010 at 9:30 amhttp://www.ripoffreport.com/Credit-Debt-Services/Clear-Debt-Pro-Inc/clear-debt-pro-inc-debt-cr-fe942.htm