Debt Consolidation vs. Debt Reduction – There’s a Big Difference
When debt relief is what you’re after, your options can sometimes be confusing – especially when it comes to debt consolidation, a phrase which you have no doubt heard many times before. The idea of simplifying your debt situation
and lowering your payments is an attractive one, but you need to know the facts about how a debt consolidation strategy works, as well as how it compares to other debt relief options like debt settlement.
Though these two debt relief strategies sound similar, they are very different, and it is important to understand why.
Debt Consolidation –
Simpler, But Potentially Dangerous
When you do business with a debt consolidation company, they have two goals. The first is to lower your overall monthly payment so you can feel some level of debt relief. The second is to lower the overall interest rate so that your payments work harder for you in lowering your total balance. While both are these are good things, the manner in which they occur can put you in a precarious position.
Debt consolidation is essentially replacing a set of unsecured debts such as credit cards, with a secure debt such as a second mortgage. This allows the loan to be paid off over a long period of time, thus lowering your payments and interest rate.
However, now your secured property (in this case, your house) is on the line. If something unfortunate happened to you and you couldn’t make your credit card payments, you would be sent to collections. But if that same event happened to you and you couldn’t make your debt consolidation payments, you would lose your house. That is
why this form of debt relief is so risky.
A Second Danger Of Debt Consolidation
Another potential danger of debt consolidation comes from your existing credit card accounts, which are still open and available after your consolidation takes place. If you’re not extremely careful, you could run up the balance on those cards all over again, effectively doubling your total debt – and that’s exactly what happens to a lot of people who choose this option over others such as debt settlement. You don’t want to risk getting even deeper in the hole.
For these two potentially devastating reasons, we do not recommend debt consolidation to anyone. It is simply too risky.
Comparing Debt Consolidation To Credit Card Debt Settlement
Now that you understand what debt consolidation is all about, let’s look at how it compares to debt settlement:
Debt settlement does not place you in a new loan, putting you
further in debt.
Instead, it provides debt relief by settling your
accounts, one at a time.
Debt settlement does offer a “one payment solution“ much like debt consolidation,
giving you the same convenience without the risk that a secured loan presents.
Debt settlement lowers your payments, but also lowers the amount of overall debt
you are committed to paying off. This allows you to achieve total debt relief in
12-36 months, rather than the many years that a consolidated loan requires to pay off.
Debt settlement is not the recommended solution for everyone, but it is a highly effective bankruptcy alternative for many Americans. Contact us today to discuss your debt relief options and find out if debt settlement is the right choice for you. We’ll listen to you and provide an honest assessment of whether or not credit card debt settlement is a practical debt relief option for your situation. Call 1-877-956-1500
