The Battle Of Debt Reduction Methods: Debt Consolidation Vs. Debt
Negotiation
If you are starting to have serious trouble paying your monthly bills,
you should consider contacting a debt consolidation or debt negotiation
company.
What is a debt consolidation company?
A debt consolidation company will make arrangements with your credit
collectors by acting as a mediator. Contacting a debt consolidation
company will get you lower rates and more agreeable terms in general.
But along with pros, cons are a part and parcel. You will be required
to cancel all your credit cards included in the plan; and you get
charged with a month’s administration fees and first pay of the program. But
for those who prefer paying all of their creditors with a single
payment, this is the best option.
What is debt negotiation?
Debt negotiation is known as debt settlement. People who are not in the
position to pay monthly debt consolidation payments; or who haven’t
been able to pay anything for past three months depend heavily on debt
negotiation to bail them out.
Here's what the debt negotiating company does is: it takes monthly pays
from you and keeps it in either an account maintained by them or in
your account itself, all while they make your creditors agree to lower the
pay-off rate to 40-50% of the total debt amount. After that is covered,
the debt negotiation company will actually pay your creditors on your
behalf.
The only drawback it has is it lowers your credit score through the
program. But then again, even that is negligible because the debt
negotiation team asks the creditors to show your account paid in full, which
clears negative status of your account. Some negotiations charge
for a separate repair service after the settlement to remove the
negative score on your credit.
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