To Settle Or Consolidate? That Is The Question

| September 21, 2017 | 0 Comments

Debt is an occupational hazard of life. An individual even needs to get in debt to boost their credit score. It isn’t uncommon to find people who owe a balance on their credit card or who have missed a bill or two as a result.

However, owing too much is a potentially risky strategy. Although being in arrears isn’t rare, there are drawbacks. For example, you can ruin your credit score and lose assets. To many, they want to be rid of their obligations as soon as possible.

As such, they turn to debt settlement and consolidation. But, which one is best? Here are the things to watch out for whether you settle or consolidate.


Debt Settlement: Smaller Payment

In simple terms, a person contacts the creditor and makes an offer. Say that individual owes $5,000, they might offer to pay back $2,500. Although this seems unlikely, it works for many reasons. To begin with, creditors want their money and are willing to be flexible. Better to get half than zero. Plus, there are stipulations. says you may have to pay back a percentage, say 15% up front, and then continue with a payment plan. Either way, if they accept, the debt will shrink in size.

Debt Consolidation: Simplifying The Process

People think that debt consolidation is also cheaper, but that isn’t true. The monthly payment might reduce in cost, yet it is paid back over a longer period. In the end, the amount is more. So, what’s the benefit of consolidating? Well, to simplify the process of debt. Owing money on a variety of credit cards is difficult to manage. By merging the debts, there is only one payment to make every month. For lots of people, the idea of making the process easier is very tempting. Also, it’s an affordable method because the rates are minimal.


Debt Settlement: Owe Multiple Creditors

It isn’t all picnics and rainbows, though. The reason that people in debt use resources such as is to avoid dealing with their creditors. Look at it this way. You have settled with one creditor and cut the arrears in half. That’s a great result, right? Yes, it is, but you still have to do it with three or four more companies. On average, families have up to 3.7 pieces of plastic per household. Trying to negotiate an agreement with numerous organisations is a lot o hassle and hard to pull off.

Debt Consolidation: Takes Forever

Picture the scene. You’re paying back the debt at an affordable rate and getting the creditors off your back. Sorry to burst your bubble, but this could be a scenario which lasts a very long time. Because of the rates, it can take an age to wash your hands of debt consolidation. Yes, the arrears will go away in the end, yet people don’t like being vulnerable for this length of time. After all, it impacts your quality of life.

As you can see, there are pros and cons of both. To answer the question, you have to figure out which pros are best and which cons are easy to stomach.

Category: Debt

Leave a Reply