When you’ve acquired a substantial amount of personal debt, it can be hard to balance your repayments and necessary expenses. Luckily, there are debt consolidation and settlement programs to help you get out from under those mounting balances and regain control of your budget. However, these two options have significant differences. Use the following comparative guide to make the right choice for your future.

Debt Consolidation

If you take this route, you can combine several debts that are hard to keep track of into a single payment plan. You then only have to worry about making one large payment every cycle, instead of logging into multiple websites and communicating with numerous companies to pay back what you owe. 

To consolidate your debts, you can take out a loan or use a balance-transfer credit card. All of your existing debts will be paid off with that single loan or card, so you can focus on repaying that creditor or lender.

One of the advantages of debt consolidation is that you might be able to negotiate a lower interest rate than some of your existing credit cards or loans, so you save money in the long run. However, you will still have to pay back every dollar you borrowed and the interest accrued, so consolidation only works if you’ve racked up a manageable amount of debt.

Debt Settlement

If you opt for debt settlement, you won’t pay off everything you owe. Instead, you’ll hold out on repayment, despite calls and emails from your creditor. Eventually, your account will be so far behind that the lender may agree to let you pay back a fraction of the original debt.

You’ll spend less money overall since you won’t return all the funds you borrowed. However, since you’re not satisfying the debt, settlement will leave a more drastic effect on your credit score. Plus, not all creditors will agree to a settlement.

This risky option is best if you’ve been behind on payments for a long time, your credit score has already taken a hit, and you don’t expect to be able to pay back your debt.

If you want to figure out which debt relief option is best for you, turn to Donald L. Spafford, Jr., Attorney at Law of Honolulu. This attorney has over 30 years of experience helping clients sort out their financial troubles with debt consolidation, settlement, or bankruptcy. To learn more about Attorney Spafford, visit the website. You can also call (808) 532-6300 to schedule a free consultation.