Choosing Debt Consolidation or Negotiation

Understanding Debt Consolidation

Debt consolidation is a service that you can either attempt to perform yourself or with a professional company that can do it for you. Debt consolidation may or may not include debt negotiation if you partner with a professional service that offers to perform the consolidation for you.

Debt consolidation is usually for those people who are having a very little difficulty paying their bills and have not been having difficulty for very long, or long enough to have their credit negatively impacted. This is because debt consolidation requires taking out a new loan, either personal, home equity, or a credit card, and using that loan to pay off all of your debts, bringing yourself a single monthly payment to manage from now on rather than continuing to struggle or juggle many payments. A service would perform all of these steps for you, both bringing you the loan upon approval of your credit as well as sending the payoff amounts of those debts included in the consolidation to the appropriate company.

Understanding Debt Negotiation

Debt negotiation is somewhat more complicated than debt consolidation, but is not necessarily exclusive from consolidation. Negotiation is usually done by those who are in extreme debt and suffering from myriad late payments or a factual inability to pay all of your debts at the minimal level each month. It is best approached in a situation if you have an amount of savings or at least some amount of income that is close to what you need to make your current payments.

Through debt negotiation, talks are held with the various companies that you owe money to in order to convince them to reduce either the interest amount you owe on the debt or settle the debt for an amount less than the total actually owed on the debt (such as .75 cents for each dollar you owe). Once you have negotiated with your creditors for a settled amount, usually the full payment is due immediately. Though it is possible to negotiate your debts on your own, it is difficult to get the same results that you could by using a professional company because the debt negotiation firms have built up a relationship with many of the national credit card companies and banks, and have established a relationship with them that the lenders feel they can trust.

If you choose debt consolidation or negotiation in order to help repair your credit, you should understand that the actual services provided are not an end to your financial issues, allowing you to continue life as it always has been. The way you managed credit and money before was a source of problems requiring credit repair in the first place. Once you have utilized the services of a credit repair services, it should serve as a wake-up call of sorts and prompt a change in your thinking and attitude about money, savings and debt. This is the way to make sure you avoid needing to use these services again and again.

Are you wanting to know more? Additional information can be found in our frequently asked questions with the question followed by the answer.