If you’re searching for ways to reduce your debt, both debt consolidation and debt settlement can get you there, but they do so in different ways. As a result, either one or the other may be a better solution for you depending on your financial circumstances.
If you’re not sure what to do to reduce your debt, Checkett, Pauly, Bay & Morgan can help. In this blog, we’ll explain the differences between these two strategies to help you determine which might be best for you.
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What is debt consolidation?
Debt consolidation is the process of combining multiple debts into one loan with a single interest rate. Essentially, with a consolidated loan, you can pay all your debts with one single monthly payment.
These types of loans are offered through banks, credit unions, online lenders, and other financial institutions. Once your debts are all consolidated into one loan, you’ll make a single payment to one lender instead of several different ones.
The main benefits of debt consolidation are:
Not having to juggle multiple loans and payments every month
Possibly securing a lower total monthly payment
Getting a lower average interest rate on your debt
Possibly improving your credit score (if you can reduce your credit utilization ratio)
What is debt settlement?
Debt settlement is the process of asking a creditor to accept less than the total amount you owe on the debt. If and when an agreement is reached, you would have to pay the amount that was agreed upon as a lump sum. Sometimes, you may also be able to pay it in installments.
However, even if you think debt settlement is the best option for you, creditors don’t have to negotiate with you. So, if you plan to go this route, you should have some cash on hand so that you’re able to pay the settlement amount out of pocket if necessary. That way, you’re more likely to be able to eliminate the debt without having to pay the full amount.
The main benefits of debt settlement are:
Having an alternative to Chapter 7 Bankruptcy
Being able to pay off the debt without having to pay the full amount
Avoiding lawsuits from creditors
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Get Rid of Debt with Checkett, Pauly, Bay & Morgan
If you need help to determine whether debt settlement or debt consolidation is the best strategy to get rid of or consolidate your debt, our experienced attorneys can help. You may find out that declaring bankruptcy is the best option, giving you a fresh start with your finances.
Contact Checkett, Pauly, Bay & Morgan, LLC, serving Joplin and Carthage, or call (417) 358-4049 for more information. The first consultation is always free.