Like most Americans, you’re looking for the best possible way to eliminate your debt forever. Whether you go credit card crazy in college or are struggling to pay back all your debt, there are two popular debt payoff strategies: debt consolidation and debt settlement.
Although debt settlement and consolidation share the same goal of eliminating debt, they take very different routes. Whatever route you take, you need to ensure that it’s the best choice for you financially. In this article, we’ll discuss the differences between debt consolidation and debt settlement to decide which is better.
What Is Debt Consolidation?
Debit consolidation involves taking out a loan or new line of credit to help pay off existing debt. Although it doesn’t reduce the amount you owe, it can lower your monthly payment and help you save money along the way. Since you’re paying one payment, it can also lower your interest rate.
Consolidation helps make payments less confusing since you don’t have to pay multiple institutions on different dates and juggle various terms and conditions. You can also shorten your repayment period and work on your credit score while repaying monthly.
What Is Debt Settlement?
Another form of debt relief is to go with the debt settlement route. While debt consolidation allows you to combine all your debt into one, debt settlement involves negotiating. When you settle debt, you’ll ask one or more of your creditors to lower the amount you owe on your account.
If you and your creditors agree, you’ll pay the amount in full or make a series of payments. However, it’s important to remember that these creditors aren’t obligated to accept your negotiation and can turn down your offer.
Weighing Your Options: Which Is Better?
So which is better—debt consolidation or debt settlement? If you’re looking for a way to gain money management skills and simplify your debt payments, consolidation is your best choice. Settlements can be unreliable, and you’re not sure if creditors will take your offer.
Superior Financial is here to help! We believe everyone deserves a second chance and to be debt free. So we offer debt consolidation loans to help you pay off your creditors’ matter if your credit history or score isn’t satisfactory. Our agents are ready to point you in the right direction.