Category Archives: Debt Consolidation
The choice between debt settlement vs. debt consolidation isn’t as tough as it initially might seem. But you must be aware that to arrive at the right decision to make, you must first weigh all the consequences that may apply to you, whichever option you might settle for. So it is key that you equip yourself with the right amount of knowledge when it comes to the advantages and drawbacks between debt settlement vs. debt consolidation.
Debt settlement can help you eradicate a portion of your debts from your current creditor. With this, you can be assured of instant relief when it comes to your monthly finances, while at the same time making the rest of your debt payments much easier to handle.
It can also start helping you build up your credit again. Debt settlement can surely help you handle your credit standing better because you will be able to firmly juggle your late payments and high amounts from debt loads.
However, its downside lies in how it can affect your total credit score. This option is seen shares similarities to the foreclosure concept. You may be able to ameliorate your score at present but in the long run, you might have to work harder with your sub lenders. You also have to be ready to face the effects it will have on your taxes. The IRS pays close attention to debt settlement and you might find yourself paying extra taxes depending on the state you live in.
Despite the claims made by some people that flatly either debt settlement or bankruptcy as the better option in all cases, in reality it all depends on your personal financial situation and circumstances. For some people, especially those with a stable income and a lot of property, debt settlement may be the better options; whereas for people with no real property beyond that which would be exempted under bankruptcy proceedings and without a stable income, bankruptcy might be the better move to make. Put simply, there is no ‘œone size fits all’ answer that necessarily applies to all people in all circumstances.
Debt settlement generally involves negotiating with your creditors and agreeing to pay a set amount of money fairly quickly in exchange for having the remainder of the debt written off. Whether you choose to negotiate directly with the creditors yourself or hire a debt settlement company to represent you, the key variable is usually an ability to pay a substantial amount of the debt owed quickly. For this reason debt settlement makes a lot of sense for people who fell into deep debt due to some unfortunate occurrence like losing a job or suffering a medical disaster, but are now getting back on their feet financially.
Bankruptcy, or at least Chapter 7 bankruptcy, is usually seen as a measure of last resort and carries considerably heavier consequences to your personal credit. However, contrary to some popular misconceptions, you do not lose your home or primary car through bankruptcy as a number of items are exempted from liquidation. Therefore if you do not have a lot of property that can be taken and liquidated and you do not really have the money to pay off the debt at all, bankruptcy may make more sense.
The increasing numbers of Americans with huge credit card debts reveal that a lot of people have incorporated credit cards as an integral part of their lives. From essential items and services to expensive trips and gadgets, almost every purchase has been made on credit. And it is no wonder why many are now trapped in debt. And while some try to settle the problem themselves, others are looking for ways to get funding from the government.
Indeed, there are steps and programs the Federal government has put into place to assist people with huge debts. But most of these programs are not monetary in nature but rather policies that are created to prevent people from losing their homes and help make getting a loan an easier process. But if you are looking for easy money from this federal account, you are going to be disappointed.
That said, you can still get out of debt or even reduce credit card debt using your assets. Assets such as your home and your car will help you get out of debt, if you just know how to play your cards right.
If you own a home and you want to use it to settle your credit card debt, you can take out a home equity loan. It is a better alternative than debt settlement since this type of loans has less interest rates and other costs entail items that are deductible by tax. But do make sure you keep up with the payments, or else you will end up homeless.