Debt Consolidation and Debt Negotiation are very effective ways of debt settlement. But to decide which program you want to opt will depend on your requirements, your debt size, your financial needs and also your credit score.
If you are not able to make your payments from more than 3 months, you are into a serious financial problem and have high debt which can lead even to bankruptcy. In such case, you cannot make use of consolidation program, debt negotiation is the only economical option left with you. You can negotiate with your creditors again to lower down your debt bill by paying a lump sump reduced amount or a monthly payment which suits the budget of the customer.
This might hamper your credit score as the credit file gets updated negatively in case of settlement by the reputed credit rating agencies. So Debt Negotiation should be used only in extreme cases when there is no way of getting out the high debt out of your life.
If high credit card debt or too many small size debts are there in your problem, it is time to manage your debt by consolidating it into one or two easy payments. Debt consolidation can be a practical solution to make your debt more manageable. But you will have to consider your credit score before you think to consolidate. If you have a high debt and a bad payment record you may not qualify for lower interest rates to refinance your debt.
If done with full research and due diligence, it can make your too many small sized debts more affordable. There are various options available under this like:
1. Debt consolidation Loan:- If you manage to get an unsecured loan for refinancing your mortgage with a lower interest rate of what you are currently paying, this can be the best way to pay off your debts at one time. If you are a home owner you can get a home equity loan to pay off your debts. But remember if you take a loan against such an important asset you should be very sure that you will be able to repay it.
An another creative option can be:
2. Balance Transfers:- If you are able to secure a credit card which carries a lower rate of interest than what you are currently carrying its better to consolidate your balances into this one. But remember the new credit card should be used only for making savings.
Thus depending on various factors one can decide which is a more profitable solution for him.
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