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Debt Consolidation Versus Debt Negotiation
By Gary Gresham
Debt
consolidation versus debt negotiation are two options that are available to you
if you need debt assistance. When your monthly bills become too much for you to
handle, it makes sense to use debt consolidation or debt negotiation for
solving debt and credit problems.
Debt
Consolidation
Debt
consolidation services have prearranged debt repayment plans with most credit
card and collection companies. When you sign up with a debt consolidation
company you are offered a lower overall monthly payment based on a lower
interest rate they have arranged with the creditor.
This
payment is lower than what the credit card companies offer you, saves you money
every month and is often the best way to consolidate debt.
One
benefit of a debt consolidation repayment plan is it will stop you from getting
harassed by your creditors as long as you make the new, lower monthly payments.
The
downside of the debt consolidation repayment plan is that you have to cancel
all credit cards that you include in the plan. You are also charged your first
payment you make toward the program and an additional monthly administration
fee. This administration fee ranges from flat fees of $10-$50, while others
charge a $5 fee for each creditor. That means you'll pay about $30 a month that
doesn't go to paying off your debts.
The
debt consolidation program benefits you if you have high interest rates or have
higher credit card bills than you can manage. Some people like to make only one
payment to one company for all of their debts.
Debt
Negotiation
Debt
negotiation is sometimes referred to as debt settlement. This is most often
offered to people who can't handle a debt consolidation program. If you can't
make the minimum payments of a debt consolidation repayment plan or haven't
made payments in the past 3 months, a debt negotiation program is the next step
for solving debt and credit problems.
One
benefit of a debt negotiation program is you stop making payments to your
creditors. The debt negotiation company either takes monthly payments from you
and keeps it in an account, or lets you keep the money in your own account.
While
you are making these monthly payments to the debt negotiation company, they
negotiate with your creditors for a lower payoff of around 40-50% of your total
amount of debt. Once the negotiated settlement is agreed upon with your
creditors, the debt negotiation company makes a one time payment to them.
A downside
of the debt negotiation program is it lowers your credit score for as long as
you are in the program. However, most debt negotiation companies require the
creditor make the credit report show paid in full so it doesn't show up as a
negative on your report once your account is settled.
Some
debt negotiation companies include a credit repair service that will remove the
negative items caused by the debt negotiation program. You pay for this service
as part of their program.
Now
that you have an idea what debt consolidation versus debt negotiation is choose
which one will work best for solving debt and credit problems for you.
Copyright
© 2005 Credit Repair Facts.com All Rights Reserved.
This article is supplied by http://www.credit-repair-facts.com
where you will find credit information, debt elimination programs and
informative facts that give you the knowledge to correct your own credit and
credit report.
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