Debt Consolidation VS. Debt Settlement

If you’re struggling with debt, you’re not alone. As of February 2020, American household debt had skyrocketed to more than $14 trillion and set a new record in the process, according to the Federal Reserve Bank of New York. Unfortunately, debt puts unnecessary strain on households while costing you even more money in the long run.

The good news? Debt doesn’t have to prevent you from reaching your financial goals. In fact, many financial strategies and services are available to help you take control of your debt and achieve financial wellness. However, not all debt reduction strategies are created equal. Exploring all of your options can help you make the most informed and beneficial decisions when it comes to managing your debt.

Debt settlement and debt consolidation are two common debt reduction strategies. Here’s a closer look at each, their differences, and which solution may be best for you.

What is Debt Settlement?

Debt settlement allows you to reduce your debt by negotiating lower, lump-sum payments with creditors and debt collectors. Also known as “debt relief” or “debt adjusting,” debt settlement can help you lower your debt amount and avoid bankruptcy while offering relief from constant harassment about credit card debt and other debt by creditors and debt collectors.

The debt settlement process is simple. First, certified debt specialists will assess your financial situation in order to determine the approach which will best meet your needs. Next, they’ll start working on your behalf to negotiate favorable settlements with your creditors. This can happen in as little as two to four months. During this time, you’ll begin making consistent monthly payments into a bank account designated for paying off the settlements once sufficient funds have accumulated. This bank account remains in your name and under your control, and all of the accumulated savings in the account belong to you.

Note that debt settlement is not about making it easier for you to make your monthly payments. Rather, its focus is on decreasing the amount of debt you owe in order to help you more quickly and easily pay it off.

Who is Debt Settlement Right For?

Debt settlement programs are generally ideal for people who are deeply in debt with multiple loans or credit cards open, and who can no longer keep up with their monthly payments. In many cases, people who turn to debt settlement have experienced a change in employment, health issue, or other financial hardship.

What is Debt Consolidation?

Unlike debt settlement, debt consolidation does not reduce the amount of money you owe. Instead, it consolidates all of your loans into one big loan. The result is a single monthly payment which may be easier to handle.

Who is Debt Consolidation Right For?

Debt consolidation is a good option for people who are trying to simplify their finances by consolidating many loans into one single loan payment. If you’re looking for an easier way to pay off your debt, you may want to consider debt consolidation.

A debt consolidation loan is not considered to be a great option for people who are deeply in debt as its primary aim is not a lower monthly payment, although there is a chance the monthly payment will be reduced if the new loan has a lower interest rate.

Additionally, if you are already past due on your loans, you may not be eligible for a debt consolidation loan.

Lastly, you should be aware that debt settlement may temporarily result in a ding to your credit score.

Which Solution is Right For You?

To sum things up, while debt settlement and debt consolidation are both pathways to eliminating debt, they are two different approaches with different benefits. While the former involves the negotiation of your debt into reasonable settlements to be paid as a lump sum, the latter involves the combining of all of your debts into one main account in order to simplify payments.

People often ask whether debt consolidation or debt settlement is better. While this is a good question, there’s not a straightforward answer. Rather, the best debt relief option for every individual depends on their unique financial situation and goals.

If you’re among the millions of Americans who feel like they’re drowning in debt, please know that there is hope. Leading debt settlement company Century has helped more than 250,000 people like you get out of debt faster with its personalized three-step program. Take your free assessment today to find out if debt settlement is the right choice for you, and to take a giant step in the direction of financial freedom.

Century Can Help

Century Support Services is a debt settlement company that has 17+ years of experience helping clients, like you, find relief from their debts by negotiating with creditors on your behalf. We have a 94 percent customer satisfaction rating after helping some 250,000 customers settle nearly $1.3 billion in debt. Contact Century today for a free assessment or to get started.

To get started, you’ll receive our free assessment and our Certified Debt Specialists will create a personalized program plan for you.

To learn more about the debt settlement process or if you have any general questions relating to how long does debt settlement take or how long will it take to recover from debt settlement, we’re happy to answer any questions.
Contact us today!