When getting out of debt is the primary concern, what is betetr settlement or consolidation?
Consolidation is a better option since you're paying the full amount here. Yes, this is a long-time payoff strategy. But the main point is you're paying the full amount. You have to make a single monthly payment till all your dues are cleared. Instead of managing multiple bills, you have to take care of only one bill. That's it.
The rule is you have to make monthly payments consistently. You need to follow a budget and lead a frugal life for saving money and avoiding debts.
Taking out a consolidation loan is a better option since you are merging all the debts into one and paying the monthly payments on the new debts. By doing so, you are actually paying all the debts with the interest. In a settlement, you are actually reducing the debt amount by negotiating with the creditors. Since you are not paying the full debt, the creditor will mention it in the credit report, which hurts the credit score more.
Consolidation is the better option if your financial situation permits you to repay the debts in full. However, if you want to get rid of debts asap, then settlement might be beneficial for you.
In the long run, financially it's better to opt for consolidation because, in settlement, you'd have to pay tax on the amount forbidden since it's considered to be your income and your creditors' loss. Moreover, your credit score may drop if you opt for settling your debts.
Debt consolidation is a better option than debt settlement, its absolutely right. But in what situation?
If you are capable of paying the debt entirely, only then it is possible. But if it isn't, what will you do?
In that situation you have no other option that getting into a debt settlement program. I know debt settlement will hurt your credit score, but atleast it is better than filing bankruptcy.
If you can manage to settle your debts through a repayment plan, and able to pay off the settled amount within time, you can again try to rebuild your credit score by taking necessary steps.
But remember, it is only wise to settle your debts is you do not have the money to pay off the debts entirely or having financial hardship. If you have the funds or can manage to pay off the debts through a single monthly payment, you must go for debt consolidation option...always.