Debt Consolidation or. The Debt Settlement Option: What is Better?
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Debt Consolidation and. The Debt Settlement Option: What one is better?
Debt settlement and debt consolidation Both have advantages and cons. Which one is right for you is based on your specific circumstances.
By Sean Pyles Senior Writer | Personal finance, financial debt Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet’s «Smart Money» podcast. The show «Smart Money» Sean talks with Nerds on the NerdWallet Content team to answer listeners’ personal finance questions. With a focus on shrewd and practical advice on money, Sean provides real-world guidance to help people improve their financial lives. Beyond answering listeners’ money concerns on «Smart Money» Sean also interviews guests outside of NerdWallet and produces special segments to explore topics like the racial inequality gap, how to start investing, and the history of student loans.
Before Sean lead podcasting at NerdWallet the company, he also wrote about topics concerning consumer debt. His work has been published throughout the media including USA Today, The New York Times and other publications. When when he’s not writing about personal finance, Sean can be found working in the garden, taking runs and walking his dog for long walks. He is based at Ocean Shores, Washington.
Aug 5 2021
Edited by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years working at The Oregonian in Portland in roles including copy desk chief and team director of design and editing. Previous experience included news and copy editing at many Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor’s in mass communications and journalism at Iowa’s University of Iowa.
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You’re trying pay down . Should you use debt consolidation or debt settlement?
They sound alike They sound similar, but they refer to two different things- and one can create more problems for you.
It’s debt-crushing time
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Consolidation of debt
In this scenario, a variety of consumer debts are rolled into a single one. You can use a balance-transfer credit card, , home-equity loan or 401(k) loan.
The reason you should consider this option:
For a lower interest rate that you’re currently paying that will help you save money and will help you get rid of your debt faster
In order to reduce the number of bills you’re managing
When it’s a debt to pay down is a manageable amount and the debt is of a manageable size,
• How to pay off your debts:
Debt settlement
This is risky since you hold back the payment from a creditor, and then, once your account is in serious delinquency you should try to negotiate a lower payment to satisfy the credit.
But withholding payment trashes your credit scores and opens you to being sued for payment. There’s no assurance that the lender will agree to settle.
You can try or hire the services of a firm, but be careful: This field is rife with scammers. It was reported that the Federal Trade Commission recently ordered 11 of these companies to stop their marketing, saying they took tens of millions of dollars from consumers , and provided them little benefit.
What are the reasons to choose it:
Do this only if have an account that’s already long-delinquent, or is in trouble an insolvency situation, and you think that the creditor might take a partial installment. There’s nothing to lose because the damage has already been done.
About the author: Sean Pyles is the host and executive producer of NerdWallet’s Smart Money podcast. His work has appeared in The New York Times, USA Today and elsewhere.
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