Debt Negotiation versus Debt Consolidation

Ten years ago debt settlement programs were in there infancy. Pretty much the only options available for debt relief were debt consolidation,(controlled and created by the banking industry), and bankruptcy, which was, at that time, easier to qualify for. Credit counseling was not nearly as evolved as it is today, and thank goodness for that.

The idea of debt settlement is one whose time has come due to the lack of flexibility built into the banking industry. By definition, a debt settlement is when your creditor agrees to accept less than the face value of the amount you owe, and call it even, or, really, write off the difference and take a tax loss. Once a credit report reads that an account has been settled, the credit score will be much less impacted than when it read owed, or charged off, and owing, or, in collection. The debtor can then begin to rebuild his or her credit. With the change in the bankruptcy laws of the recent past, debt settlement programs have become increasingly popular. Why? Because, if you are not a candidate for bankruptcy, or have a moral aversion to it, and you simply cannot afford a debt consolidation program. the debt settlement program can be a life saver.

The best debt settlement programs are those in which you actually employ an attorney to represent you. You get to decide on the monthly payment you can realistically afford, and this determines the length of the program. Generally, you want to try to complete the program in the shortest time you can. Although, the older a debt becomes, the More likely it is that the creditor will accept a lower settlement. Lets say you have 30,000 of unsecured debt and your cumulative monthly payments are 900.00 at an average of 28% interest. You are in a pay for life program. You might as well take your money and let blow away in the wind. If you seek relief in a debt management program, you may reduce your monthly payments to somewhere between 700 and 800 dollars per month, and finish paying off at reduced interest rates in about 5 years.

So, you start a debt consolidation program and everything is fine until you loose your job and get a new one with a 30% pay cut. You realize you can no longer afford the debt consolidation program, miss a payment or two and get dropped, with no return point. You now have the option of the safety net of a debt settlement program. The debt settlement program can reduce your monthly payments to as low as $400.00 and you will wind up saving in total about 15,000. of the $30,000. you owe. When you factor in interest saved, the savings is quite staggering. In addition to debt settlement, you can also enter a debt audit\debt settlement program in which you may even save more money, stop creditor phone calls, and have the audit attorneys now speak to your creditors. A portion of your monthly payments will go to the attorneys fees and a portion to a trust account for settlements to be made when the time is right. Only you can decide which type of debt relief program you are most comfortable with. One of the problems associated with debt consolidation programs is that the dropout rates are quite high. The reason is that as in the previous example, for whatever reason people cannot sustain the monthly payments for 5 years, and where this is the case, creditors are very unforgiving. If you have questions, please feel free to email me, my email address is listed below.

Written By:
Steven Ciantro
American Debt Enders
Help@americandebtenders.com
516-476-5903

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Comments

[Dan]

Good post with all the points about debt settlement and debt consolidation...

Dan
http://www.perfectmortgagelender.com/