What’s the difference between debt settlement or negotiation and debt consolidation? Debt consolidation usually involves home equity or other cheap loans that enable you to pay off consumer debts in exchange for one loan payment. Like mortgages, loans to consolidate debts are commonly secured, usually by your equity in your property.
Debt settlement or debt negotiation is simply a process whereby you get your creditors to agree to payments that are manageable for you to make. Through debt settlement or negotiation, you may be able to get late fees and high interest rates lowered or in some cases waived. If you can afford a lump sum payment, you might also be able to get them to agree to accept payment on a lower principle than what you actually owe.
Most though not all debt settlement companies will charge you for their services. They will deduct fees for setting up your debt settlement account from your first payments. They will probably also charge you some sort of monthly fee. What this means is that, instead of your money going directly to your creditors, it goes to a middle-man first. Be wary of debt settlement companies that charge you for what you can probably accomplish yourself by picking up the telephone and talking to your creditors.
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