What is the difference between debt settlement and debt consolidation?

Debt settlement and debt consolidation are two debt relief options available to California residents, but they operate differently. Debt consolidation combines multiple debts into one single loan with a single payment. The goal of debt consolidation is to make repayment easier and potentially reduce the rate of interest. Debt settlement is a type of negotiation that can reduce the amount of debt owed and the total repayment amount. In California, debt settlement is usually conducted through a debt settlement company. The debt settlement company will enter into negotiations with the creditors to try to significantly reduce the total amount of debt owed. It is important to note that debt settlement is not a guarantee and it is possible that creditors will not agree to the reduced amount. As you can see, the main difference between debt settlement and debt consolidation is that debt consolidation combines multiple debts into one loan, whereas debt settlement involves negotiation with creditors for a lower amount of debt to be repaid. With debt settlement, the borrower is not responsible for paying the original debt amount and can potentially save money in overall repayment.

Related FAQs

How can I monitor my progress during a debt settlement process?
Are there any potential risks if I choose not to settle my debts?
Can a debt settlement company guarantee a successful settlement?
When is it best to pursue debt settlement?
Can I be sued while in the process of settling a debt?
How will I know if the debt settlement negotiations are successful?
Are there any costs associated with a successful debt settlement?
What is a lump-sum debt settlement and how does it work?
Can I negotiate a debt settlement without the help of an attorney?
How does a creditor determine if a debt should be settled?

What is the difference between debt settlement and debt consolidation?

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