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Debt Consolidation vs. the Debt Settlement Method: Which one is better?
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Debt Consolidation and. the Debt Settlement Method: Which is Better?
Debt consolidation and debt settlement each have their pros as well as cons. The best option for you is based on your circumstances.
By Sean Pyles Senior Writer | Personal finance, credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the producer and host of NerdWallet’s “Smart Money” podcast. In “Smart Money” Sean talks with Nerds across the NerdWallet Content team to answer the questions of listeners about their personal finances. With a focus on thoughtful and practical money tips, Sean provides real-world guidance that can help consumers better their financial lives. In addition to answering listeners’ financial questions on “Smart Money” Sean also interviews guests outside of NerdWallet and also creates special segments to explore topics such as the racial gap in wealth as well as how to get started investing, and the history of student loans.
Before Sean took over podcasting at NerdWallet He also covered issues that dealt with consumer debt. His work has appeared in USA Today, The New York Times as well as other publications. When when he’s not writing about personal finance, Sean can be found working in his garden, going for walks, or walking his dog for long walks. He lives at Ocean Shores, Washington.
Aug 5, 2021
Written by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, financial management and debt Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years working at The Oregonian in Portland in roles including copy desk chief and team editor and designer. Prior experience includes writing copy as well as news editing at various Southern California newspapers, including the Los Angeles Times. She received a bachelor’s degree in mass communication and journalism at The University of Iowa.
The majority or all of the products we feature come from our partners who pay us. This influences which products we review as well as the place and way the product is featured on a page. However, it does not affect our assessments. Our views are our own. Here is a list of and .
You’re trying to pay down . Should you use debt consolidation or debt settlement?
They may sound similar, but they mean two very different things -and each can lead to more problems for you.
It’s debt-crushing time
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Consolidation of debt
In this case, several debts are rolled into a single one. You can make use of a balance transfer credit card, , home-equity loan and 401(k) loan.
What are the reasons to choose this option:
To get lower rates of interest than you’re paying now, that will help you save money and helps you to pay off debts faster.
To reduce the amount of payments you’re juggling
If it’s a debt reduce is in a manageable size and the debt is of a manageable size,
• How to pay off your debts:
is risky because you withhold payments from a creditor and then, once your account is severely delinquent attempt to negotiate a lesser amount of payment to settle the debt.
Withholding payments can ruin your credit score and exposes you to being sued over payment. And there’s no assurance that the lender will agree to settle.
You may try hiring or trying an organization, but be cautious that this industry is full with shady players. It was reported that the Federal Trade Commission recently ordered 11 of these companies to stop their marketing. They claimed that they took tens of million of dollars from the public and offered them little benefit.
The reason you should consider this option:
Make sure to do this only if you have an account that’s already long delinquent or in an insolvency situation, and you think that the creditor may take a partial installment. There’s nothing to lose because the damage to is already done.
The author’s bio: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.
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