Why Is Debt Consolidation Better Than Debt Settlement

Settling your debts can be a very difficult task especially if you do not have enough money to pay all your creditors. Aside from having bad credit, your financial opportunities are also limited when you have numerous unpaid debts. One financial option to settle your debt is by making a debt settlement agreement with your lender. This is becoming a popular way for creditors to generously help their borrowers to settle their debts quickly.

In debt settlement, a borrower has to negotiate with his creditor to pay only a portion of his debt. Instead of filing for bankruptcy, a borrower can do this to clean their slate of outstanding balance. A lot of creditors find debt settlement a better option than not to get anything at all from their borrowers. If you have a debt worth $50,000, you can make an agreement with your creditor that you can only give him $35,000. If your creditor agrees, you have to give them the amount that you promised so they can cancel the unpaid amount in your record. When they report to the credit bureaus, they can give you either of these remarks: “Paid”, “Settled”, or “Settled for less than full amount.”

Most creditors are willing to negotiate with their borrowers. Otherwise, their borrowers will have to declare bankruptcy, which means that they cannot pay their debts. The good thing about debt settlement is that the creditors are still paid even if their borrowers are having a hard time paying all their debts. For the borrowers, they can use that extra money saved from paying their debts in full to invest in passive income generating sources like stocks, a new business, mutual funds, CFD trading, bonds, and futures.

However, debt settlement has some drawbacks, too. This can hurt your credit report and you can possibly be charged with a lawsuit if problems arise between you and your creditor when fail to settle the agreed amount. A person who considered debt settlement may also experience some negative tax return consequences.

Before you resort to debt settlement, you can also consider applying for a debt consolidation loan. A debt consolidation program can be your best alternative than debt settlement because it can help you pay your debts but it also gives positive feedback on your credit report and improve your reputation as a borrower, provided that you are able to pay your debt on a timely basis.

In debt consolidation, you can have your multiple debts consolidated in one secure loan with possibly a lower interest rate than all of your loans combined. The best thing about applying for a debt consolidation loan is that aside from a low fixed interest rate, you also do not have to worry paying numerous bills because you will only have to make one debt payment every month. This way, you can pay your loan on time, enjoy a low interest rate, and make extra savings that you use for your existing CFD trading, stocks, and mutual fund investments.

Ultimately, you can manage your finances easily if you acquire a debt consolidation program. You can createa solid budget in no time because of the convenient payment schedule of your debt.