What is the difference between debt settlement and debt consolidation?

Debt settlement and debt consolidation are two different options that can help individuals manage their debt. In Pennsylvania, debt settlement is a legal process, governed by the Fair Debt Collection Practices Act. When someone engages in debt settlement, it allows them to work out an agreement with creditors to pay back debt for less money than is owed. This often involves negotiating down the amount of the debt, sometimes in exchange for a lump sum payment. On the other hand, debt consolidation is the process of combining multiple debts into one single loan. This generally requires taking out a new loan to pay off the existing debts, which can be a loan from a bank, credit union, or other lender. This new loan will often have a lower interest rate and lower payments than the existing debt. In summary, debt settlement is a legal process of reducing the amount of debt owed to a creditor, while debt consolidation is a process of taking out a new loan to pay multiple debts into one single loan. Both processes can help individuals manage their debt, however, debt settlement typically results in the individual paying less money overall than they would have otherwise.

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What fees will I pay if I use a debt settlement company?
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How can I learn more about debt settlement laws in my state?
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What is the difference between debt settlement and debt consolidation?

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