Debt Relief Vs. Debt Consolidation

There are several differences between debt relief and debt consolidation. The main difference is that debt relief results in the forgiveness of some or all the debt, while debt consolidation does not. Debt relief also tends to be a more expensive option, because the creditor is likely to lose money on the deal. Debt consolidation is less expensive because the creditor can recover at least some of the money that is owed to them.

Another difference between debt relief and debt consolidation is that debt relief can be used to eliminate most types of debt, including credit card debt, student loans, medical bills, tax debts, and past due accounts. Debt consolidation is typically limited to housing-related or automobile-related debts.

Another difference is that debt relief may require the assistance of a non-profit organization, while debt consolidation does not. Some creditors are willing to reduce or even eliminate the interest on a loan if they believe that it is unlikely that the money will ever be paid back in full. Such creditors may also agree to accept payments through an alternate channel, such as Social Security Disability Insurance.

Another major difference between these two options has to do with the length of time they can stay on your credit report. Debt relief generally stays on your credit record for seven years, while debt consolidation typically stays on your report for four.

Debt consolidation is essentially a form of borrowing more money to repay old debts. However, the new loan only has one payment per month, which will usually be expressed as an interest rate percentage. Debt consolidation often places people in a better position because monthly bills are reduced, and they have only one payment to worry about each month. Because the terms on the new loan are more forgiving than on some of their existing loans, debt consolidation can potentially save money over time by reducing overall interest rates on all the consolidated loans.

During debt relief, creditors generally forgive part or all of your outstanding debts if you can prove that it is unlikely you will be able to repay them. Debt relief can come in several different forms, such as debt settlement and bankruptcy. The creditor may accept less than the full amount of what is owed to them during this process. As a result, people who go through this option end up with no or fewer debts that they must repay. Both debt consolidation and debt forgiveness work best for those who can make regular consistent payments on their new consolidated loan. 

If you cannot make your monthly payments as agreed, such as if you lose your job or become disabled, then either one of these options could be very risky because it will take much longer to pay off your existing loans even if you used debt consolidation. It might also damage your credit score if you to keep up with repayment schedules over time. Both debt relief and debt consolidation can be complicated, so you should consider getting professional help with each option.

Conclusion

If you do choose debt relief over debt consolidation, be sure that the company you use is dependable and has proven results. Because there are many people who would like these services, some companies take advantage of this fact by charging outrageous fees or even ripping off consumers altogether. You should never have to pay any fees or costs until both parties produce an agreement - otherwise, what is the point? Try looking for reviews of the company on the web before making any decisions about which option is best.