What is the difference between debt settlement and debt consolidation?

Debt settlement and debt consolidation are two different ways of dealing with debt. In debt settlement, you negotiate with your creditor to lower the amount of money that you owe. You and your creditor will meet to discuss a lower balance that you can pay in order to settle the debt. The creditor will usually accept the lesser amount as payment in full and the debt will be removed from your credit report. Debt consolidation, on the other hand, does not involve negotiation with creditors. Instead, it combines all of your debts into one loan. You will often have a lower interest rate, making it easier to pay the loan back. Instead of having multiple payments to multiple creditors, you only have one loan payment to make each month. Debt settlement can be a better option if you’re unable to make all of your payments, but it can also negatively affect your credit. Debt consolidation, on the other hand, does not affect your credit score and it’s relatively easy to pay off. In Nebraska, debt settlement is governed by the Fair Debt Collection Practices Act, which protects consumers from predatory debt collectors. Debt consolidation, however, is not regulated by this law, so you should do research to find the best option for you.

Related FAQs

Should I be wary of any companies offering “instant” debt settlement?
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Can I negotiate a lower interest rate as part of a debt settlement?
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Are there any laws governing debt settlement?

What is the difference between debt settlement and debt consolidation?

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