Debt Consolidation Loans vs Debt Settlement

Overwhelming debt is a cause for concern. It is a curse that can make a hell out of your life. Phone will not stop ringing, creditors may chase you to office or home and tension is less likely to leave you. Lucky you are because there are different formulas to break out of debt shackle. However, the key to speed up your recovery from debt is much to do with which option you choose. There are two most tried out and trusted solutions for debt break – debt consolidation loans and debt settlement.

You must rely on logic to choose a program from the available options. What has proved beneficial for your colleague or neighbor will not be a good workable option in your case. Every formula applies to case-to-case basis and takes into account three factors, the debtor’s income, monthly payable installment and the personal characteristics. Consider a choice you can see through the end to realize whether it will put you in good stead over time or not.

For the debtors who need a speedy cure of their debt ailment, it is not easy to make a choice between debt consolidation and debt settlement. Both have some positive and negative aspects. In most of the cases, debt settlement is considered a better option. The debtors always struggle a lot to make full payoff. So, lower payment is always attractive for them and it explains why they prefer debt counseling. However, there are some cases where debt consolidation loan will ensure more benefits than settling debt with your creditor.

What you will choose and when?

If you have a regular income flow: This is one of the prerequisites to get a loan. In fact, if you apply for a debt consolidation loan, the creditors will enquire about your source of income. If you don’t have a job or no other solid source of income, it is less likely that the lenders will provide you with a loan. In that case, you will better off by negotiating with your creditors about debt settlement.

If getting a small reduction on debt payment is your priority: With a debt consolidation loan, it is possible to enjoy a smaller reduction in your scheduled installment, provided you chosen the right consolidation plan. However, if you want significant reduction in monthly payout, then go with debt settlement.

If you own a good credit score: It means you can optimize the benefits from your debt consolidation loan. A good credit score will help you get a loan at the lowest rate possible. This is a clear indication that you will end up repaying less than your current payment obligation. So with a high credit rank, debt consolidation sounds a good choice.

If you want to rebuild your credit score or plan to make an expensive purchase: If you are planning to make a big investment for buying home or car, you should try to improve your credit score. You need an option having no significant effect on your credit score. Debt consolidation will serve your purpose. Make sure to be regular with your payment and that will expedite your arrival to a perfect credit standing.