Debt Consolidation Or Debt Settlement

Debt settlement is very different than that of debt consolidation

, and these very differences should be considered before electing either of these routes. It is doubtful that anyone really likes being in debt, however it is inevitable for the large majority of us, unfortunately though sometimes this situation gets out of hand and we end up in a spot of trouble that at times may become overwhelming and even all consuming.

Debt consolidation options vary and can be made available to alleviate all or part of one's debts, although these options may prove to be fairly expensive. Although this may even be the last option available, it has proven to save people from possible bankruptcy or liquidation. The process should not be considered hassle free though and may well require an acceptance of the fact that significant costs can be incurred within the process of debt consolidation.

If it is the last option available to you, a full working knowledge of the process is the best route to follow, even as a last resort option, by understanding the costs and fees involved, including the additional interest that will be paid back is essential to avoid any future misunderstandings and unpleasantness.

The process will certainly require that your affairs are organized and remain so, and the basic process that will follow is that all outstanding accounts will be paid off and a single account will then have to be repaid. This alleviates a lot of admin on your side, however if you had any debts that were almost paid off, these amounts will be incorporated within the loan and will therefore incur interest expenses all over again.

This is one of the main reasons why debt consolidation is often times frowned upon, however as stated it may be the last option available, and therefore may be your only choice. You will also want to be aware of the standard or at least comparable rates before going this route, as there are individuals and organizations who will take advantage of people that do not make themselves aware of current rates and practices within this industry.

If you have a lump sum investment or savings account this amount can be used to pay off these debts, if it has come to the point that you are considering a debt consolidation option, due to financial affairs becoming unmanageable. In the event of these invested funds or savings being utilised one would term this practice as being that of debt settlement, as compared to the consolidation option. One of the key factors that one has to come to terms with is that debt is expensive and the payment of interest, although justifiable, is literally throwing money away. We may have to take loans for certain purchases, but really should attempt to avoid spiralling into debt unnecessarily.

by: Chris Kennelly

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