The
Battle Of Debt Reduction Methods: Debt Consolidation Vs. Debt Negotiation
If you are starting to have
serious trouble paying your monthly bills, you should consider contacting a
debt consolidation or debt negotiation company.
What is a debt
consolidation company?
A debt consolidation company will make
arrangements with your credit collectors by acting as a mediator. Contacting a
debt consolidation company will get you lower rates and more agreeable terms in
general.
But along with pros, cons are a part and parcel. You will be
required to cancel all your credit cards included in the plan; and you get
charged with a month’s administration fees and first pay of the program.
But for those who prefer paying all of their creditors with a single payment,
this is the best option.
What is debt negotiation?
Debt
negotiation is known as debt settlement. People who are not in the position to
pay monthly debt consolidation payments; or who haven’t been able to pay
anything for past three months depend heavily on debt negotiation to bail them
out.
Here's what the debt negotiating company does is: it takes
monthly pays from you and keeps it in either an account maintained by them or
in your account itself, all while they make your creditors agree to lower the
pay-off rate to 40-50% of the total debt amount. After that is covered, the
debt negotiation company will actually pay your creditors on your behalf.
The only drawback it has is it lowers your credit score through the
program. But then again, even that is negligible because the debt negotiation
team asks the creditors to show your account paid in full, which clears
negative status of your account. Some negotiations charge
for a separate
repair service after the settlement to remove the negative score on your
credit.
|
