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Hello, can you please tell me what the difference is between debt settlement and debt consolidation? also will it affect my credit rating?


Hi alex

Welcome to the forums.

debt settlement is a process of negotiating with your creditors to reduce your debt. It is a bankruptcy prevention program and thus it should be considered only when there is no other alternative to pay off your debt. It adversely affects the credit rating if your debts are current and there is no history of late payments.

However, debt consolidation is the most popular and widely used program which is benefitting the common man in solving their financial problems. It covers all the unsecured debts where all the multiple payments get consolidated into one loan amount in easy installments. In debt consolidation, there is no reduction in the amount of debt as in settlement, but all the financial charges, late fees, can be waived off.

Presenting both cases, when consumers have outstanding balance with more than one creditor, debt consolidation will be beneficial. On the other hand, when the consumers have huge outstanding debts and there is no way left to pay them off and declare bankruptcy, debt settlement will be the best move.

If you are left in a fix of which one will be the best choice, please have a look at

also will it affect my credit rating?

As we all know that the credit report is very important in assessing our present financial position. Based upon our credit report, we acquire credit.

After you have paid all your debts through the debt consolidation program, your credit report will appear in good shape. Enrolling yourself in a debt consolidation program will appear in your credit report. The purpose is to prevent you from obtaining additional credit while you are enrolled in the program. After you have paid in full, it is dropped from the credit report. During that period, it shows that you have taken this responsibility to clear off your debt.

People who can pay off debts on their own don't require enrolling in a debt consolidation program. It is designed for those people only who struggle very hard to make ends meet, skip payments, and being late with others. In such cases, their credit report is already dinged.

So, debt consolidation is a positive move to erase your existing debts and hence improve your credit report. Your credit report is the most prestigious financial document which should always appear clean.

Please keep posting in the forums and join the board to enjoy the services and benefits of the debt consolidation program.


Sub: #1 posted on Thu, 06/02/2005 - 16:34

roxette roxette

(Posts: 4009 | Credits: )

Hello Alex,
Welcome to the debt consolidation care forums.

I read your query and I will try to explain it as precisely as possible.

debt settlement7 is a mode of negotiating with your creditors mostly without the help of any third party mediation. This is the last resort that you may have, in order to prevent bankruptcy. However, you should be able to prove that you are on the verge of a bankruptcy. If the creditor feels you have huge assets, which can be liquidated, or if he finds out you do not have any late payments in the past, there is no scope for settlement.

However, if you do manage a settlement, there is something you must remember Alex. In most cases, the credit report may say, ???Settled???. But, this may have a negative impact on your scores. Try to negotiate with the creditor in such a way that he rates the account as ???Paid as Agreed???. In case, the account is turned over to the collections, try to persuade your creditor to remove the collections' debt account from the report completely. That will be within your legal rights to demand for the removal of the collection account from your report.

To get more detailed information about debt settlement, you may view this article:

However, debt consolidation is the process of consolidating your multiple unsecured debts into one single figure, usually with the help of a debt consolidation company. The company negotiates on your behalf and comes to an agreement for you to pay-off your debts in easy monthly installments. Your interest rates will be, a single and to the highest probability, lesser than your original interest rates.. In most cases, although the actual debt may not be reduced as in the case of settlement, however, the late and other additional fees are all waived off. This program makes your payment more convenient and affordable.

To know more about how debt consolidation helps a debt ridden person become debt free, check out the article provided by this site:

The most essential issue, while paying off your debts, is your credit report. It is the responsibility of the credit consultant to try and make you debt free as fast as possible. During the period you are in this program, it will appear on your reports. It will only prove that you are making sincere efforts to pay off your debts. After all your dues are paid off, it is automatically updated in your credit reports.
If you feel you require any such consolidation advises and suggestions, you may join this community and become a registered member. To do so, you can simply fill up the signup form. and become a free member.

Hope this helped answer your queries.
Do return for further queries.


Sub: #2 posted on Fri, 06/03/2005 - 03:31

peter peter

(Posts: 285 | Credits: )

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