If you are unable to manage your debt payments and your debt load is increasing, then you should opt for a debt solution without wasting much time. There are various types of debt solutions available in the market. You just need to select that one which suits you best. However, this article highlights pros and cons of 2 simple types of debt solutions – debt settlement and debt consolidation.
Debt settlement
A debt settlement program helps the debtors to reduce their debt load. Under a debt settlement program, the debtor or the debt settlement company negotiates with the creditor so as to lower the payoff amount. Let us know few benefits and drawbacks of debt settlement program.
Pros of debt settlement
1.This program helps to reduce the total amount of debt by 40% to 60%.
2.You might get rid of debt within 24 to 36 months and therefore you can start to build your credit again.
3.It helps you to avoid bankruptcy.
4.All unsecured debts and medical bills can be included in debt settlement program.
Cons of debt settlement
1.It reduces your credit score.
2.The settlement companies charge upfront fee plus monthly fee for their services.
3.You will still get calls from your creditors.
4.You will have to pay tax on savings.
Debt consolidation
This is one of the most popular debt solutions that are available in the market. Through a debt consolidation program, a debtor combines a number of short-term, unsecured loans (store accounts, credit card, and personal loans) into one bigger loan.
Pros of debt consolidation
1.You have to make only single monthly payments.
2.You need to deal with only one creditor.
3.You have to manage only a single loan.
4.It helps to improve your credit score gradually.
Cons of debt consolidation
1.It takes longer time to wipe out the debt.
2.It is easier to incur further debt.
3.You may end up paying more over the long haul
4.If you don’t pay a secured loan, then you may loose everything to foreclosure.
These are the pros and cons of 2 simple types of debt solutions that you must know.
Tags: Credit Score, Creditor, Debt Consolidation Debt, Debt Consolidation Program, Debt Load, Debt Payments, Debt Settlement Program, Debt Solution, Debt Solutions, Debtor, Debtors, Loan Pros, Medical Bills, Personal Loans, Secured Loan, Settlement Companies, Settlement Company, Store Accounts, Unsecured Debts, Unsecured Loans