debt settlement,debt consolidation,counseling difference..
Date: Tue, 07/01/2008 - 21:06
What is the difference between debt settlement vs. consolidation?
And is this also the same as credit counseling?
How does 'debt settlement' effect one's credit report?
debt consolidation loan This loan will get you one payment wi
debt consolidation loan
This loan will get you one payment with a lower interest rate. But you will have to put up some form of collateral like a house or some land. I almost never suggest these because its never a good idea to turn unsecured debt into secured debt because if you experience hardship you could lose your home.Most financial advisers will agree with me on this. Plus in most cases you are just robbing Peter to Pay Paul.
debt management Plan or dmp
This plan is administered by a consumer credit counseling agency.Credit counseling is for people who are not overextended and thus can afford their minimum payments and just need one payment with a lower interest rate. Credit Counseling agencies will be able to negotiate with all creditors to accept a lower interest rate " usually around 6%-10%, waive late fees and over limit fees and spread your payments out over 5 to 7 years. You will repay 100% of your current balance with a payment that typically runs about 3% to 4% of your total debt. If you have the ability to repay the full debt you borrowed you should do a Debt Management Plan. This program doesn`t hurt your fico score but will show on your credit report you are in a program to keep you from getting more credit until you complete the program. Once you complete the program it comes off your report as iff you were never in the program.
debt settlement
Debt Settlement is a hardship program for people who can`t afford the payments for a debt management plan, can't continue paying minimum payments, can't borrow to pay off debts and don't want to file bankruptcy. If and only if you are overextended or if your debt are already severely delinquent should you consider debt settlement.It will get you a monthly payment around half of what you would pay in a DMP and you will be out of debt usually around 24-36 months. This program does hurt your fico score because creditors won`t settlement until the account is 120 days + past due. However if you are a good candidate for this program your bills are most likely past due anyways or about to be so the fact it hurts your score would be irrelevant. This program is designed to get you out of debt fast so you will be in a prime position to start reestablishing your credit and avoid bankruptcy.
I hope this info helped answer you question :D
