Debt Consolidation or Debt Negotiation – Which To Choose?

No matter how wretched your financial situation is, no matter how inescapable you feel your debts are and no matter how deep of a debt puddle you’re currently standing in, there is a financial solution as well as a means to get your feet dry and back on solid ground. There are plenty of answers, various sure-fire ways for you to get out of your current financial mess and become a financial success. And of the most common ameliorative financial options to choose from, here are two prime choices – Debt Consolidation and Debt Negotiation.

Both solutions are quite similar in that they heal deep debt wounds and bring individuals back to a stabilized financial position, but both tailor to two different types of indebted individuals. Debt Consolidation plans assist those in need with sufficient means. On the other hand, Debt Negotiation assists those in dire need, in situations where money is too tight to apportion.

First, let’s take a look at the debt consolidation option, and secondly the Debt Negotiation vein, each outlining specifics as to allow you more information to better decide which is best.

The Debt Consolidation Option

Debt Consolidation is accommodating specifically to standard indebted individuals, one’s who need actual consolidating to better organize themselves financially and stabilize a plan to finally pay off accrued due debt. Debt consolidation is primarily best suited for individuals who are financially able to, in the least, provide the minimum payments required through a debt consolidation motion.

In practice and structure, Debt Consolidation is a process where an action combining or “consolidating” one’s debts -whether they be personal loans, home equity loans, mortgage debt, car loans, credit card debt, or other financial liabilities- into a single loan occurs. Simply enough, the individual in debt is in essence, and through assistance of a debt consolidation company, accumulating all of his or her debt together to deal with it in one sum. This is done by taking out a single loan to pay off all spread out debts collectively, as one large whole.

The aforementioned process is usually done with intent to achieve a lower monthly payment, one that can be extended over time simply to pay off debt through one primary vein and in one go, gradually over time. And if carried out properly, debt consolidation can and most certainly will lower one’s annual interest rate and/or monthly payments, hence providing more available funds to save month to month.

The Debt Negotiation Option

Sometimes referred to as Debt Settlement, Debt Negotiation is often a financial option for indebted individuals who cannot handle going through a standard debt consolidation motion. Reason here is simply due to lack of funds; if said individuals cannot provide funds for the minimum monthly payments usually attached to a well-structured debt consolidation repayment plan then a debt negotiation program is the most realistic next step to take toward solving outstanding debt and credit problems.

What happens here, and to a hassled indebted individual’s benefit, payments to creditors are halted, put on ice. The selected debt negotiation company pulls payments from you monthly, safeguarding those funds in a specific account, either the company’s or your designated personal one. Through this period of monthly pulling the debt negotiation company is working for you, negotiating with involved creditors for lower payoff amounts, usually up to 50 % off your bulky debt total. And upon successful negotiation, a one time payment is provided to applicable creditors from your debt negotiation company.

You might think that this has a negative effect on your credit score and you’d be correct. Your credit score is lowered, yet, this lower score is only applicable for the length you’re in the negotiation program. And even after the program is complete, creditors are required to place a ‘paid in full’ note as to avoid putting a permanent negative mark on your credit score. Overall, credit furbishing is provided through the aforementioned or through a provided credit repair service to remove all negative traces.

Which To Choose?

To choice is up to you. One thing must be kept in mind; choices should be made based on your financial capacity and overall ability. Know which financial program is best for you. If you’re in a standard debt situation and need some organizing to pay off all your debt, seek debt consolidation to do so. Yet, if you’re in a thick financial mess and have minimal, almost non-existent funds to allocate through a normal consolidation program, request a debt negotiation option to fix you up.