subject: Credit Card Debt Relief - What's the Difference Between Debt Consolidation and Settlement? [print this page] Credit Card Debt Relief - What's the Difference Between Debt Consolidation and Settlement?
Debt relief has many hues. It is for the Credit card user to decide what exactly he wants to do with his debt. Life in the US revolves around Credit cards. Most people would find it quite impossible to survive without them. Most of the users also do not make timely repayments finding themselves deep in debt. Thereafter they are struggling for debt relief.
Let us take a case study of two users, Victor and Michael. Victor has accumulated a debt of $10,000. He has been using his Credit card for the last four years. After loosing his job Victor has not been able to pay his bills. He would prefer to go in for a reduction of his debt if it is possible. He would prefer to eliminate the debt entirely since he does not have a regular income anymore. Oh the other hand Michael has a steady job that pays him less but pays him regularly. Michael has almost maxed his three Credit cards. He has collected a debt of $11,000 and is not sure how to eliminate it. The high rate of interest of his cards has made the payment of monthly bills near impossible. He would prefer to cut down on his monthly pay out and does not mind making small payments for a longer period.
Here are two cases that sort of require opposite treatment. Victor needs to go in for a debt settlement. He does not have a regular income and can not pay monthly installments for long. Once a settlement is negotiated the debt is likely to be reduced to $5000. Victor can pay this amount using his saving or going in for a fresh loan.
Michael needs to go in for a consolidation exercise. He is assured of a monthly income although relatively less in quantum. He needs to get his rate of interest reduced. He can put all his debt under one head and go in for a reduction of interest. He could also spread his repayment over a longer period. Thus consolidation will help him in this critical situation.
Debt settlement is a viable alternative to filing bankruptcy. Most consumers are able to eliminate at least 60% of their unsecured debt while avoiding many of the negative consequences with filing bankruptcy. If you are over $10k in unsecured debt you will be eligible for debt settlement.
