Should you go for Debt Consolidation or Debt Settlement ...???

It is often seen that individuals becoming a little confused in choosing whether to avoid Bankruptcy through Debt Settlement or Debt Consolidation.However, both being peaceful alternatives to Bankruptcy. It is advisable that the consumer analyzes the financial situations he is into in order to decide the more appropriate option for him. It depends on the ability of the individual to check the amount wants to save on his bills in order to select the right program for him.

Now there lies a basic difference between the debt consolidation and the debt settlement program. In a consolidation programs all the obligations of the consumer is carried forward which can accumulate to a lump-sum amount, however the interest rate that would be charged on the consumer would be much lower than the rate charged by normal creditors.Now the financing company or bank which provides the consolidation amount will have to paid back by the consumer through monthly installments. Now, this amount will be much much lower than previous bills demanded by the creditors. Thus, there will be huge savings on interests but the principal amount shall remain the same.

In case of a debt settlement program the actual loan amount is substantially reduced. Debt Settlement companies shall actually negotiate with the creditors and reduce the amount to be paid back to 50 to 70% of the actual amount. However , debt settlement leaves a scar on the credit report which makes it difficult to get future creditors approve loans.

Both the strategies however, have different comforts and discomforts from an individuals personal point of view. For some it might be a more feasible option to pay the lump-sum amount at once and count savings on the interest charges. However for another it might be more of a viable option to actually pay less than the borrowed amount.