What is the difference between debt settlement and debt consolidation?

Debt settlement and debt consolidation are two popular options for those struggling with debt in New Mexico. The main difference between the two approaches to debt management is how debt is handled and how long it will take to pay off. Debt settlement is a process where a debt settlement company works on your behalf to negotiate with creditors to reduce the amount of debt owed. It involves making one lump sum payment to the settlement company, which is usually lower than the total amount of debt owed. The company then negotiates a reduced balance with creditors and negotiates a lower interest rate. This process can take up to a year or more to complete. Debt consolidation, on the other hand, is a process where multiple debts are consolidated into one monthly payment. This single payment is usually lower than the combined monthly payments, and consolidating debt can help reduce interest rates and make repayment more manageable. The consolidation loan is usually paid off within 3-5 years. Both debt settlement and debt consolidation can help reduce the amount of debt owed and make repayment more manageable. However, consumers should be aware that debt settlement can have an adverse effect on their credit score, whereas debt consolidation may not. Additionally, debt settlement is typically a longer process than debt consolidation and does not always guarantee a successful outcome. Ultimately, the consumer should consider their own unique financial situation and decide which approach is best for them.

Related FAQs

What is a debt validation letter?
Can a debt collector threaten to call the police?
What is the difference between a debt collector and a creditor?
Can a debt collector send me a post-dated check?
Can a debt collector garnish my wages?
Can a debt collector contact my family or friends about my debt?
Can a debt collector repo my car?
What is a consumer debt defense attorney?
What is a settlement offer?
How do I settle a debt?

What is the difference between debt settlement and debt consolidation?

Related FAQs

Related Blog Posts