When you are in a financial bind, it is easy to make rash decisions before doing your research. Since you have landed here, it is clear you are on the right track and looking for help. This article provides you with information regarding the differences between using a debt settlement program or choosing a debt consolidation loan. Choosing between debt settlement or a debt consolidation loan could result in a significant impact on your credit score.
How Debt Settlement Works
When choosing debt settlement as a debt relief option, you can become debt-free within a few years. A debt settlement company such as Roundleaf Inc., will evaluate your debt and help you decide which program is best for you. With our debt settlement program, our consultants help you negotiate with your creditors to reduce your overall debts. We work with you and your creditors to make sure the agreement is not only fair to you but also fits within your budget. We even help you determine which creditors to pay off or negotiate with first. Typically, we focus on the debts that will improve your credit score the most. On average, many of our customers see a reduction of 50% or more in their total debt amount. This enables you to make lower monthly payments.
Unlike other debt settlement companies, we continue to work with you and mediate with each creditor until all debts are in agreement. We continue to offer our debt planning and financial education services to make sure you are successful.
It is essential that you know how your credit score will be affected by using a debt settlement program. We make sure you understand the pros and cons of your specific situation before we begin.
While the initial impact can be damaging, you should see continuing improvement throughout the process of the program. The Fair Credit Report Act (FCRA) ensures that creditors must report each settlement accurately, which in turn helps your credit score go up.
How Debt Consolidation Works
Debt consolidation loans are a much riskier option; however, when consumers have not done their research, it is likely the first option they choose. A debt consolidation loan is essentially taking all of your high-interest loans and credit cards and transferring them to a different loan or credit card with a higher balance. This option leaves consumers with only one payment to make. Initially, this idea seems like the best option until consumers start using those credit cards with a zero balance to continue living the lifestyle they are accustomed to.
Now consumers will have another monthly payment and higher debt-to-income ratio. This can lead to a disastrous financial downfall if consumers are not disciplined. For this reason, it is advised to cancel all other credit cards and refrain from applying for more credit.
Choosing a debt consolidation loan has higher associated costs than using a debt settlement program. Debt consolidation loans typically take longer to repay since the total amount of debt has not decreased by much.
While debt consolidation loans may help some consumers, they do not work for everyone. With an experienced debt consultant by your side offering financial advice and negotiating with creditors for a debt settlement offer, it has benefits that help pay off and reduce your debt.
When Will You Benefit from Choosing a Debt Settlement Company?
No one plans to be in debt. Sticking to a strict personal financial budget from the beginning is the key to success. However, when you are not successful with your debt management and your debt-to-income ratio is out of control, it is time to speak with consultants at Roundleaf for a debt settlement plan. The following are key points of when you could benefit from choosing a debt settlement company over a debt consolidation loan:
1.You can no longer keep up with the minimum monthly payments required for loans and credit cards.
2.You have debt collection agencies calling to collect these debts.
3.You have multiple accounts that are in delinquent payment status.
4.You are not in the market to buy a home or other large purchase.
5.Your credit score being negatively impacted for a short time is not an immediate concern.
When Will You Benefit from Choosing a Debt Consolidation Loan?
If your debts and spending habits are still within your control, then a debt consolidation loan may benefit you. You will be lowering your monthly payment by getting rid of the high-interest credit card payments. While this option typically takes several years more than a debt settlement program, consumers will know what their monthly payment is, usually receive a fixed interest rate, and have a pre-set payoff date for their debts. The following are key points that illustrate the benefit of choosing a debt consolidation loan over a debt settlement company in specific situations:
1.Your credit history has been managed well, and you can receive a debt consolidation loan with good interest rates and terms.
2.Saving money on lower interest rates is a must, but the longer length of the loan is not an issue.
3.You have trouble making current monthly payments, but you know you will be able to make the one monthly payment to the debt consolidation loan.
4.Preserving your credit score is important to you as well as maintaining your credit history for future purchases.
5.You are disciplined enough to refrain from accruing more debt.
Avoid using Non-reputable Debt Settlement Companies
The FTC has rules in place to protect consumers from scammers. Check BBB and Review sites before making a decision to enroll with any debt settlement company. Do not use a debt settlement company which promises to erase a percentage of your debt. A reputable debt settlement company will ensure you are aware of all the risks of using one of their programs.
You must do your research and talk with experienced debt consultants to ensure you are choosing the right debt settlement company, as they are not all created equally.
Our experienced consultants at Roundleaf Inc. are prepared to analyze your current financial situation and provide you with the best option through education and planning. Our goal is to help you obtain financial freedom as quickly as possible.
Contact us today to see how we can help you with your specific situation.