Debt Reduction Methods

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.