Debt settlement vs debt management - Which is the right choice?
Are your monthly debt payments getting out of control? Do creditors harass you with threatening phone calls and letters? If so, then it's time you start to work your way out of the crisis. This can be done either by reducing your debt amount or restructuring your monthly payments. That is, you need to negotiate a debt settlement or debt management plan with your creditors or collection agencies.
How to choose between settlement and debt management
If you're thinking how to decide upon debt settlement vs debt management, try analyzing your financial situation. You may even take help of a debt relief company and attend a free counseling session with their consultant.
The consultant will take into account your current income, liabilities, and debt payments and make an assessment of your financial situation. Based on your financial situation, the consultant will assist you in comparing debt settlement vs debt management so as to help you take the right decision.
How settlement and debt management plans work for you
While the consultant at the debt relief company helps you to decide between debt settlement vs debt management, you need to get an idea about how each option works.
- Debt settlement: It's a way that helps you to reduce your outstanding debt balance by 40-60% of what you're supposed to pay back. With settlement, you get the chance to get out of debt without even filing a bankruptcy. You'll also be able to stop harassing calls from creditors or collection agencies.
- Debt management: Such a plan is usually offered when simple budgeting tips don't seem enough to help you pay off your dues. In such a case, what you need is negotiation with creditors to reduce the interest rates and late fees on your bills. Here's when a debt management plan (DMP) can help you get over your financial problems.
When to go for settlement and debt management plans
Usually, if you have a stable income source to help you carry out your monthly debt payments, a debt management plan is what you should choose. Using a DMP, you can take advantage of reduced interest rates and avoid paying late fees and extra charges. However, if you can't afford to make monthly payments even at reduced rates, going for settlement would make sense.
Both settlement and debt management can help you out of debt problems and make your life stress-free. But you need to understand which option suits your situation. Only then you can utilize the benefits of the option and make it work in your favor.