If you are struggling with debt right now, you may be wondering what solution is right for you between consolidation, settlement or management. Just what s the difference with these options and which is the best choice for you?
Like a lot of people, you likely are not very knowledgeable when it comes to settling debt and dealing with financial situations like this. So let’s briefly look at each option to get a general understanding.
Debt consolidation basically is where you might be taking smaller debts that you have maybe credit card debts, other loans and rolling them into one loan. You’re consolidating them together.
Debt settlement is basically when you’re looking at what you owe, and you negotiate a lower lump sum payment to the creditor. You are actually working with your creditors here to agree on a lesser amount to pay. This option will likely negatively affect your credit score.
Debt management is a process where the debt is being paid off but through lower interest rates and shorter payoff period. More of your payment is going to pay off that debt versus going towards interest. This is a negotiated amount and may not affect your credit score.
So which one is the best choice for you and your situation? You know you really have to look at your personal situation to determine what might be best for you. Because the circumstances are so different for each person.
It is really a good idea to get some professional help like someone in personal finance. They can spend time with you, counseling you about your assets, income, credit report.
Every situation is different! You need to be looking at what is the best solution for you. And then talk about what those solutions might be. Then you can choose what’s going to work best for you.
And again every person’s situation is different, so it’s better to get advice from a professional and make an informed decision.
So if I choose to consolidate your debt what happens? Well those individual debts that you have credit cards, loans, etc., are rolled into one single loan. But you must use caution, because there may be closing costs associated with that loan. That’s something to consider also. Always read the fine print!
And if you choose to settle your you need to be careful as well. That’s because although it sounds good and you are basically negotiating a lower lump sum payoff of what you owe, there are some fees that could be high and tax implications as well as impacts to your credit report.
If you’re not aware of that you could be getting into something that maybe you really didn’t want to get into. So the bottom line here is seeking advice from a professional and find the best route for your situation.