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Debt settlement or consolidation - What are the major differences between the two?

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what is the difference between debt consolidation and debt settlement? with settlement the credit report is ruined this true?


Hi Curlycarl,

Welcome to the debt consolidation forum.

difference between debt consolidation and debt settlement

Debt settlement: This is another option that's become increasingly popular with consumers who have a lot of debt and can't, or won't, file bankruptcy. You stop paying your bills and instead make a regular monthly payment to the settlement company. Your creditors contact them, and not you, about your overdue bills. As your accounts fall further behind, the negotiation company will settle your balances ??? usually for 50% of the balance or less (including fees) depending on the debt. Most people can be out of debt in less than two years or less using these programs.

Debt consolidation: Debt consolidation is a process where your multiple debts are consolidated into a single amount. On approaching a debt consolidation firm the consultant first analyses your present debt amount. The debt consultant then negotiates with the creditor on your behalf and reduces your debt amount to around 30%-60%. In most cases interest rates are reduced. Late fees and hidden taxes are also waived at times. The revised debt amount is divided into easy monthly installments that make your repayment plans much easier.


with settlement the credit report is ruined

Yes, with debt settlement there is high chance of a negative credit rating. It's not perfect choice. Your credit rating will be hurt in the short run and make sure you're dealing with a reputable company. Still, for consumers who can't shoulder the burden of debt they have now, it can be a very good option.

We would appreciate your active participation in the forum more often and hope you share your insights and knowledge with other members of the forum.


Sub: #1 posted on Thu, 02/03/2005 - 04:19

Jason Jason

(Posts: 2427 | Credits: )

Does being enrolled with a debt consolidation company and making monthly payments faithfully give a better credit report than enrolling in a debt settlement company?

Sub: #2 posted on Mon, 08/20/2007 - 17:55


Yes, debt consolidation is much better from debt settlement. Sometimes people are not able to afford the payments set in the consolidation plan, and hence because of this reason, they likely enroll in a settlement plan. You may try negotiating with the creditor for a fair reporting with the bureaus. Your credit will look good if the account is not marked as "Settled" or "Settled in Full"

Sub: #3 posted on Tue, 08/21/2007 - 13:04

Bony Bony

(Posts: 287 | Credits: )

what is difference between debt settlemnent and debt management

Sub: #4 posted on Wed, 05/27/2009 - 08:32


how is fees calculated

Sub: #5 posted on Wed, 05/27/2009 - 12:44


I have serious credit card debt, serious payday loan debt, and I still owe about 2,000 on my car and that has been sent to a collection agency. I make decent money at my job, but the pay day loans have me so backed up with interest and I have to keep taking them out over and over and then more that I can't get ahead of them. All of my bills are suffering and my car doesn't even run now and it needs major work. What is my best option? Can all of these be included in debt management or settlement?

Sub: #6 posted on Tue, 06/23/2009 - 10:53


I thought Debt Consolidation was a loan.

Sub: #7 posted on Tue, 06/23/2009 - 11:34


If I only have one credit card and a balance of 12,000.00 but
I can't afford the monthly payments and I don't want to
not pay the bill what is the best solution for me?

Sub: #8 posted on Wed, 07/29/2009 - 15:01


I would like to know also. I have $20,000 on one cc and will not be able to afford min payments. What is best option?

Sub: #9 posted on Wed, 07/29/2009 - 22:04


I have close to $100,000 of debt through credit cards, hospital bills, and car notes. I am drowning in bills that can't be paid. What can I do?

Sub: #10 posted on Mon, 08/10/2009 - 17:16


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