What Is The Difference Between Debt Consolidation, Debt Relief, and Debt Settlement
Many people are confused about the differences between debt consolidation, debt relief and debt settlement solutions. They wonder if these solutions could apply to their situation and whether lenders can help them in this area. Basically the writer of this submission has $33,000 in credit card debt and wants to explore solutions for dealing with this debt. He is right when he points out that the interest cost on a debt like this with 19% interest rates will result in a much higher cost to him and it will take many years to repay when only making the minimum repayment. There are better solutions, however it depends on the details of the debt, the persons income, and their credit rating. More details will need to be provided before a specific solution can be provided. In the mean time we will briefly describe each of these solutions to help readers who might be considering these solutions.
Debt Consolidation – basically you take several area of debt e.g. several credit cards combine them into one loan, usually at a lower interest rate and term. The loan is repaid more quickly, costs less due to the lower interest rate and once fully paid becomes a positive report on your credit rating.
Debt Relief – usually means that lenders i.e. the credit card companies in this example, will be agreeable to the partial or total forgiveness of debt owed in exchanged for complete payment of the remainder. This is an unusual situation and must have extenuating circumstances to enable this type of solution. Most people or companies would not qualify for this solution.
Deb Settlement – occurs when both parties agree to a lower amount of debt that will be repaid in full. Basically the lender will write off the unpaid amount. Again extenuating circumstances are involved. The lender must be convinced that this is a better situation than demanding the total amount.
The best solution for many consumers will be a debt consolidation loan which will combine loans and credit card debt, lower the interest rate and improve the credit rating at the same time. Debt relief and debt settlement solutions could have a negative impact on individual credit ratings. Deciding on the correct solution requires a detailed analysis of personal financial details before a decision can be made.
DEFAULT LOAN APPLICATION FOR BORROWER’S INFORMATION
Home/Mortgage Loan Amount :: $33,000
Home Loan Application and Processing Speed (when do you need the funds):: I need some help with a large credit card debt problem and wondering what the best approach is – debt consolidation, debt relief or debt settlement.
Do you currently have a mortgage? :: no, I rent an apartment
Bank Name and Branch :: Wells Fargo Bank, Pacific Coast Highway
What City/Town, State and County do you live in? :: Malibu, California
Zip :: 90265
What is your employment field? :: City Employee
Employment Position :: Administrative staff
When are you paid? (monthly/weekly/biweekly):: Bi-weekly
Your credit rating to be – excellent, fair, or bad? :: Fair
How did you find us? :: Looking for help for my debt and wondering what the best solution is
How are you paid? (direct deposit/paper check):: Direct deposit
Gross Amount Per Paycheck :: $1730
Do you agree to have this information published online, without your PRIVATE information of course? :: Yes if it will help others with the same situation, but please keep my personal information private
Extra information here please (some detail):: I owe $33,000 and having trouble repaying this debt due to my own circumstances. Basically my credit card debt got out of control and now I am faced with mounting monthly payments at interest rates that are around 19%. As you probably know with interest charged at these rates and paying just the minimum payment, it will take years to repay this debt and the total interest paid will far exceed the original debt. Although I got into this situation myself and have no one else to blame, it is still a ridiculous situation to have found myself in.
What are the options for dealing with this debt? What is the difference between debt consolidation, debt relief, and debt settlement and would any of these solutions help me deal with the debt and get my financial life under control? We are planning on having a family, buying a house and we need a new car. With this debt hanging over my head, my wife and I are worried that we will not be approved for a mortgage or a car loan.
Note to Lender :: We live in Malibu, California and both of us are currently employed with the city. Our jobs are secure as far as we are aware and we expect to receive regular salary increases over the next few years at least based on time on the job. We are planning a family and need to get this debt issue resolved, improve our credit rating and save some money for a down payment on a home.
Although there is this large debt based on credit cards, we have got our financial life together now and managing our expenses to avoid getting into this situation again or making it worse than it is. We are exploring options to help us deal with the debt as economically as possible without also degrading our credit rating.
Can you help us understand what the difference is between debt consolidation, debt relief and debt settlement?