Credit card debt consolidation and debt settlement programs are two popular options today for consumer debt relief.
So which one makes more financial sense for your situation? Credit Card Debt Consolidation This can be a good option for consumers with several high interest credit cards.
Instead of paying all these bills back separately, a consolidation loan will combine all the balances and allow you to pay them back at a lower rate of interest.
These loans will almost always have a lower interest rate than your credit card bills because you will have to back up this loan with a secured asset.
Most consumers use their house or automobile for their secured asset.
Credit card debt consolidation can be a good option but you must be confident you can comfortably pay back the loan.
If you fail to pay the loan back or go delinquent, you could end up losing your home so be careful.
Debt Settlement Programs This can be a good option for consumers with at least $10,000 in credit card debt that are experiencing a financial hardship and are struggling to make their payments.
When a consumer enters into a debt settlement program they must make the independent decision to stop making payments to their creditors.
Instead of making payments to their creditors they will be paying into a savings account until enough funds are built up to offer the creditor a settlement deal.
Typically once you have gone delinquent for several months and have built up a savings account of 50% of the balance it is time to offer your creditor a settlement deal.
Creditors of unsecured debt understand that if you file bankruptcy they will likely receive none of their money back.
Knowing this, most of the time they will accept a 50% settlement deal rather than take the risk of you filing bankruptcy.