Is Debt Settlement Superior To Debt Consolidation?

It has always been a matter of competition for both the debt consolidators and debt settlement companies to prove themselves over each other. But somehow debt settlement has managed to stay ahead in this race of oligopolies.

What are debt consolidation programs?

Debt consolidation programs give you a loan to help you manage your way out of debt by allowing you to pay off your earlier creditors.

You are charged interest on it and at times even to your earlier creditors. Your principle amount remains the same, but you are still kept far away from clearing your debt.

In short, you don’t get to experience a debt-free life for a significant amount of time; and by the time you do, you no longer have a life.

This is why most people choose debt settlement over debt consolidation.

What is debt settlement?

Debt settlement, on the other hand, is your rescue ship if you are drifting toward bankruptcy. If you are already in bad standing with your creditors and your credit rating is low due to a lack of payment history, then joining a consumer debt relief group can be the best way to modify your debt to income ratio and stabilize your account ratings.

Looking at this new status of yours, where you have cleared your past debts with the help of debt settlement program, your future creditors will hold you in consideration.

And this definitely saves you from facing bankruptcy, which really should be your last option if you are in debt, as it is so damaging to your credit score.

The bankruptcy tag accompanies you for a very long time--almost seven to ten years after your filing for it. This takes away your financial freedom and books you as unreliable in the eyes of creditors. And this is precisely why debt settlement will provide you with a better solution than debt consolidation.

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Generation debt: more college graduates owe money after college

Whether you're currently in college or a recent graduate, you've probably got your mind on your finances, so much so it seems like you're majoring in debt.

More Americans are attending and leaving college in debt, according to reports released by the Democratic Policy Committee, the National Conference of Bankruptcy Judges (NCBJ) and the Project On Student Debt, who also say in 2004, two-thirds of four-year college graduates had student loan debt, up from less than one-third in 1993.

Reportedly, compared to a decade ago, more people are borrowing large amounts to pay for college than they ever have before, even after accounting for inflation. In 1993, 1.3 percent of graduating seniors with student loans owed at least $40,000 (in 2004 dollars). In 2004, 7.7 percent owed $40,000 or more.

Getting snared in debt while borrowing money for higher education is bad, but coupling it with credit card charges is worse, according to the NCBJ, which says that college students often are solicited by credit card companies during their registration.
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More than half of today's college freshmen owe over $1,500 in credit card debt, states a survey by an educational lending company. It also indicates that the balance will more than double by the time those students are seniors because interest charged for credit card debt typically is far higher than that for student loans.

And according to a report from the State Public Interest Research Group's Higher Education Project, students from lower income households are more likely to graduate from college with debt. In 1999-2000, 71 percent of students from households that make less than $20,000 graduated with debt.

It's that debt, says the committee, that causes students to delay buying a home or a car and to postpone marriage or starting a family. Experts agree that while a complete solution is not readily available, a little common sense can go a long way.

Don't abuse credit cards. Having some credit isn't bad in itself. Using it frivolously and not paying off the monthly balance is financially reckless.

Pay on your student loans: OK, something like this may seem obvious, but you can only be in forbearance or deferment for so long before the collected interest starts to get a little stifling. And not paying your loan while going into default isn't something you want to do. Plus, some of the payments are tax-deductible.

Get professional business advice: Financial planning before, during and after attending a college or university is crucial to your future (and mental well-being, for that matter).

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The Basics of Debt Consolidation and Refinance

Mortgages are secured loans that are given to first time buyers, homeowners and people who have bad credit. The loans refinanced for debt consolidation are loans offered against the equity of your home. Once you are accepted for the loan, you must repay the debt, which will include interest rates. Some refinancing loans have additional fees attached. The secured loans have collateral attached, means that if you fail to make payments, you are subject to foreclosure or repossession. The bank will come and take your home and sell it for the amount you owe.

This is why it is wise to make sure you know what you are getting into if you plan to refinance to consolidate your debts. Some loans permit buyers to repay the loans in 25 years, while others allow 30 repayments. Few of the lenders available on the Internet that offer refinance loans for consolidation of debts are aware that people go through hard times-or at least they don't deal with people directly enough to actually feel this hardship through talking to them.

On the loans that offer lower interest rates, combine payments for debt consolidation. If you can manage to pay for the loan in the time stipulated, it is likely that you will take less time to pay back the loan amount borrowed. Once you find a lender to refinance your mortgage and combine your bills for debt consolidation, you will receive a loan based on capital and interest.

The Repayment loans for refinancing and consolidation make it easy, since the lenders will combine the interest and repayments into one monthly installment. Still, few lenders will allow you to repay the interest rates only; however, be aware that these types of loans do not combine your payments for consolidation; rather they put you at risk in some instances.

Still, there are several types of loans available that will help you refinance for debt consolidation, so keep an open mind and mull over your choices carefully before you make a final decision.

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