Coca-Cola vs. Pepsi. McDonald’s vs. Burger King. Cat vs. Dog. We think you get the idea! For many years, people, especially Americans that find themselves in debt have always wondered which is best…Is it debt consolidation or debt settlement?  First, let’s explain what each of them do, and then we’ll discuss which one is better.

Debt Consolidation: What, Why, and How

Have you ever heard the phrase, “Digging a hole to fill another one”? If you have and never understood it before, now you will.

In basic terms, debt consolidation is when you take a new, lower interest loan and use it to pay off all your current debts. These debts can include credit card balances, auto loans, student debt, and many other personal loans. But this can only work if you’re dealing with a manageable amount of debt.

Debt consolidation requires you to pay your full debt balances (without any negotiation) using funds from a new loan. Basically, “digging a hole to fill another”. But, is this even safe or a viable option? Yes, and even many debt settlement companies may even recommend you do this first if you don’t have many debts and wish to get rid of them.

Now, is it really worth it? If you are committed to paying off the full amount of your debt under a consolidated loan, then the answer is yes. Or if you are even comfortable with paying a loan over a longer time period, then the answer is also yes. But, if you’re not even sure if you will be able to pay off the new debt consolidation loan or don’t know how to even manage your debts and finances now, then the answer is no. It’s certainly not for everyone but, it has helped millions of Americans get back on their feet.

Debt Settlement: What, Why, and How

To sum it up, debt settlement also called “debt relief” or “debt adjustment”, involves hiring a third-party company to negotiate a lump-sum payment that each of your creditors will accept instead of paying the total outstanding balance. Depending on the situation, debt settlement offers might range from 10% to 50% of what you owe.

People can settle their debts by themselves or hire a debt settlement company to do it for them. In the latter case, you’ll have to pay the company a fee that’s calculated as a percentage of your enrolled debt. What is this? It’s the amount of debt you have when you enter the program. By law, the company can’t charge this fee until it has settled your debt.

Now, is it really worth it?  With debt settlement, you get relief from unbearable debt faster than other debt-free options (like debt consolidation). Usually, this process takes about a year or two and though it may seem like a lot, other debt options take even more. Also, you avoid bankruptcy, something that most Americans run away from. And not only that but you can also avoid getting sued and your debt won’t be sent to collectors! Sounds like a win right?

Debt Consolidation Vs. Debt Settlement Review

So whether debt consolidation is the option for you or debt settlement, both are great ways to become debt-free and that’s what we want in the end, right? For more information, follow us on Instagram as @mediatorlawgroup and contact us today.