Consolidation Debt Settlement - 2 Debt Relief Programs In One?

Most people think of debt settlement and debt consolidation as being mutually exclusive. However, it is possible to combine the two debt relief programs into one comprehensive approach toward eliminating debt. Let us first examine each program separately and then explain how the two programs can come together in a two-pronged debt solution.

Debt Settlement

Creditors would rather receive some of the money owed to them, then to receive nothing at all. Customer accounts with non-payment issues typically are turned over to collection agencies, where creditors only receive pennies on every dollar owed. Therefore, when an individual or agency contacts a creditor to negotiate a reduced settlement, creditors are often willing to slash the amount owed by up to 70%. Often, creditors will only negotiate amounts that are available to be paid immediately in a lump sum.

Consolidation

A consolidation agency provides a loan that is large enough to pay off all of an individual’s creditors in one fell swoop. The borrowed amount is then repaid to the agency by way of a single monthly payment that is made until the sum is paid in full. Interest rates and loan terms are adjusted so that they fit in with an individual’s current budget.

Combining the Two

If you go into debt settlement negotiations, you will need to be able to pay your creditors off in lump sums. Therefore, when you combine consolidation with settlement, you can borrow the funds needed to close your individual accounts at dramatically reduced lump sums. You can then repay the loans to your agency.

When you combine settlement and consolidation, you are given the leverage necessary to negotiate with companies for a swift and drastically reduced immediate settlement. You therefore save money with creditors on settlement and you are able to reduce your total consolidation loan amount.

Many people choose either consolidation or settlement as a means of paying off the money owed to creditors. However, there are obvious advantages to combining both programs into one comprehensive debt reduction plan.