Alesha's Finance Advice

In the world today, whether the debt is due to poor money management or credit card spending, many people cannot see their way out of debt for many years. Millions of people are seeking a solution to their overwhelming debt. There are different debt consolidation solutions to solve this, however each solution needs to be researched carefully.

Debt settlement, or debt negotiation, and debt consolidation are two completely different things. A debt settlement company charges an enormous amount of money to set up your account and then will charge you a service fee every month until your debt is settled. Since there is no predetermined time frame this can take a long time, even years.

The debt settlement company does take your money every month. However, unlike consolidation companies that distribute the payments to your creditors, the debt negotiation company saves the money in an account. They will pay a creditor in full but only after they are able to reach an agreement with the creditor and there is enough money in the account.

This debt relief service doesn’t ask your creditors to stop interest fees and late charges. This means that before they reach settlements with your creditors you are still receiving the notices in the mail and threatening phone calls. It is still possible that your creditors will sue you and you may still have your paycheck attached.

While debt consolidation companies work with your creditors to lower your payments — to help you meet your obligations — debt settlement firms do not. They will not negotiate any type of rate with your creditors and will not offer assistance should you be sued.

A debt negotiation program can have a negative impact on your credit rating, especially if your creditors never agree to settle. However, if you do not see any progress on a consolidation program as well as do not qualify for a personal bankruptcy you may want to consider enrolling in a debt settlement plan.

In most cases getting a consolidation loan is preferable because your creditors are paid off immediately and your credit begins to improve right away. The only debt you owe is to the consolidation loan lender, and when you make your payments on time to the consolidation company, this is also reported on your credit as a positive item and your credit score improve even more.

The difference between debt consolidation and debt settlement companies is great. That is why it is critically important that you research every company that you are considering using to understand the difference of their debt solutions before you sign the contract. Using the Internet you can research many companies within minutes.

Remember to research the reputation of the company that you are considering by viewing their website and reading the customer comment page. You can also call your local Better Business Bureau to see if the company has any complaints against them.

When you have made a decision, sit down face to face with their credit counselor and ask as many questions as you can and make sure that your questions are answered to your satisfaction.

By: Paul Sarwana

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debt consolidation