Debt, especially credit card debt, is becoming a problem for consumers across the nation.
This problem will only get worse in 2011.
Many individuals who are deep in debt are looking for a way they can escape their financial obligations.
For people who owe large amounts of money and are unable to continue making payments, there are a few options to consider, including debt settlement, debt consolidation, and bankruptcy.
Because of the damage it causes to one's credit report, bankruptcy should always be the last option.
This leaves settlement, also called negotiation, and consolidation as potentially viable ways to remedy one's financial situation; here are some things to know when deciding between consumer debt settlement and debt consolidation in 2011.
Consumer debt settlement involves negotiating with creditors to lower the amount you owe in exchange for a lump sum payment.
Negotiation can be between the consumer and creditors directly, or it can take place through a third party.
Settlement allows individuals to pay off their debt in full, but it is not without downsides.
Typically, a consumer will need to save up enough money to "tempt" creditors before beginning negotiations; this means that they must stop making payments on their accounts in order to save the money.
These delinquent accounts will damage one's credit score.
Additionally, when a debt is negotiated to a lower amount, creditors will give this information to credit reporting agencies.
Your credit report will show that you "settled," which may make future lenders wary.
Debt consolidation involves taking out a loan and using that money to pay off all of one's bills to credit card companies, health care companies, or any other unsecured debts the consumer owes.
The money from the loan pays off all financial obligations in full, and the individual's financial obligations are reduced to one simple monthly payment, sometimes lower than the amount they would be paying to individual creditors.
Though this process does not reduce an individual's debt by a large amount, as negotiation does, it is not harmful to one's credit score.
An individual no longer needs to worry about missing monthly payments to creditors, and nothing about the consolidation will appear on a credit report.
Ultimately, individuals deciding between consumer debt settlement and debt consolidation in 2011 have a difficult choice to make.
Consider the benefits and drawbacks of each before making a decision.
This problem will only get worse in 2011.
Many individuals who are deep in debt are looking for a way they can escape their financial obligations.
For people who owe large amounts of money and are unable to continue making payments, there are a few options to consider, including debt settlement, debt consolidation, and bankruptcy.
Because of the damage it causes to one's credit report, bankruptcy should always be the last option.
This leaves settlement, also called negotiation, and consolidation as potentially viable ways to remedy one's financial situation; here are some things to know when deciding between consumer debt settlement and debt consolidation in 2011.
Consumer debt settlement involves negotiating with creditors to lower the amount you owe in exchange for a lump sum payment.
Negotiation can be between the consumer and creditors directly, or it can take place through a third party.
Settlement allows individuals to pay off their debt in full, but it is not without downsides.
Typically, a consumer will need to save up enough money to "tempt" creditors before beginning negotiations; this means that they must stop making payments on their accounts in order to save the money.
These delinquent accounts will damage one's credit score.
Additionally, when a debt is negotiated to a lower amount, creditors will give this information to credit reporting agencies.
Your credit report will show that you "settled," which may make future lenders wary.
Debt consolidation involves taking out a loan and using that money to pay off all of one's bills to credit card companies, health care companies, or any other unsecured debts the consumer owes.
The money from the loan pays off all financial obligations in full, and the individual's financial obligations are reduced to one simple monthly payment, sometimes lower than the amount they would be paying to individual creditors.
Though this process does not reduce an individual's debt by a large amount, as negotiation does, it is not harmful to one's credit score.
An individual no longer needs to worry about missing monthly payments to creditors, and nothing about the consolidation will appear on a credit report.
Ultimately, individuals deciding between consumer debt settlement and debt consolidation in 2011 have a difficult choice to make.
Consider the benefits and drawbacks of each before making a decision.
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