If you're looking for debt relief, you may be looking into both debt settlement and debt consolidation. Debt settlement is the process of settling debt for less than you owe, while debt consolidation is a debt restructuring plan that involves reducing payments through the reduction of interest.
Both options are fantastic for those who are currently struggling financially, but there are situations in which debt settlement may be preferable:
1. Your Debts Are Paid Off Immediately
A debt consolidation is usually structured to pay off your debts in between three to five years. For those who want to immediately pay off their debts and begin saving money again, a debt settlement may be better. Debt settlements occur immediately.
2. You'll Pay Less In Total
Debt settlements are settled for a portion of the debt. Through a settlement, you might only pay 40% of the debt in total. With a consolidation or restructuring, you will usually need to pay the full amount of the debt over time, including interest. The payments are only reduced because the interest amount is reduced. The actual amount that you save depends on the negotiations. A bankruptcy attorney can help you negotiate your debt.
3. You'll Be Able to Begin Improving Your Credit
Following a debt settlement your credit score will go down. But you'll be able to immediately begin rebuilding your credit, as long as you are conscientious about your finances. With a debt consolidation, your debts will remain on your credit report for the duration of your payment plan. You may not be able to begin rebuilding your credit fully until the debts have been paid off, three to five years in the future.
4. You Can Settle Only Some of Your Debts
If your debts are otherwise manageable and you only have one or two large debts, a debt settlement is usually best. Medical bills, for instance, may be difficult to pay off even if the rest of your financial situation is stable. Through settlement, you can only pay off the debts that are difficult to maintain and then keep the rest of your debts on a standard payment structure.
If you can't afford to settle your debt, there's always bankruptcy. Bankruptcy is often the most complete form of debt relief, as it will involve a review of all your assets and debts. Following a bankruptcy, you will usually be in a position where you can begin building a firmer financial future. A bankruptcy attorney can help.
To learn more, contact a company like Dennis Lee Burman Attorney at Law for more help.