When choosing between debt settlement and debt consolidation, there are several factors to consider.
Definition
With consolidation, multiple debts are rolled into one single monthly payment either through a loan or a debt management plan. Settlement is the process of negotiating with creditors to pay less than what is owed.
Advantages of Consolidation
With consolidation, your monthly payment is lowered, interest is reduced and fees are waived.
Disadvantages of Consolidation
If debts are consolidated through a debt management plan, this can be damaging to credit scores and there is often a fee associated with these types of plans.
Advantages of Settlement
Debt settlement allows you to pay less than you owe and get out of debt more quickly.
Disadvantages of Settlement
Settlement requires that you stop paying on your debts, resulting in serious delinquency, continued collection efforts and damage to your credit.
Which Is Better
Consolidation is better for those who need to make their monthly payments more manageable. Settlement is more advantageous for those who are severely delinquent and carrying higher debt loads.
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