All debt relief options share a common goal: to help individuals and their families get out of debt. Although their purpose is the same, they can have varying effects on your short and long-term financial health. Comparing debt settlement vs. other relief options like debt consolidation loans, bankruptcy, and making minimum payments can help you choose the best method for your needs, including reducing your monthly payments.
Debt Settlement vs. Debt Consolidation Loans
Debt settlement allows you to pay off your debt for less than you owe while also combining and lowering your monthly payment obligation, by up to 50%.
A debt consolidation loan also combines your monthly payments on multiple debts into one but does not reduce the amount you owe. A consolidation loan may have a lower interest than what you were paying before, which can save you some money.
Debt Settlement vs. Making Minimum Payments
By lowering the overall amount that you owe, debt settlement helps combat compounding interest. You’ll repay a fixed amount in 12 to 48 months based on the terms of your debt settlement program, which prevents interest from extending your debt repayment.
Making minimum payments is the slowest and most expensive way to pay off debt. Most minimum payments are too low to keep up with the accruing interest, which means very little of your monthly payment pays down the principal balances, and your debt keeps growing!
Debt Settlement vs. Bankruptcy
Both debt settlement and bankruptcy can resolve your debts for less than what you owe. However, they impact your long-term financial health and creditworthiness differently.
Both Debt settlement and bankruptcy can lower your credit score. However, the effect is less extreme with debt settlement. In a recent survey of graduated clients by Accredited Debt Relief, 100% of those who enrolled with a fair score (580 to 669) completed the program with scores that improved or stayed the same.
Bankruptcy can negatively impact your financial reputation for seven to ten years, depending on which type you file. Even if your debts are fully discharged, the real cost of bankruptcy comes in the form of legal fees and damage to your creditworthiness. Borrowing money, renting, buying a house, getting a job, and more can be impacted by bankruptcy.
Debt Settlement Can Significantly Reduce Your Monthly Payment
If you’re experiencing financial struggles and have more debt than you can afford to pay off in the next two to four years, debt settlement may help resolve your debts for less and more quickly than you would on your own.
Debt settlement with Accredited Debt Relief can cut your monthly payment by up to 50%. It also reduces the total amount you owe and can save you thousands of dollars compared to a debt consolidation loan or making minimum payments.
If you are struggling with debt, contact a Certified Debt Specialist for a free quote.
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