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Two Methods of Debt ReliefDebt has become a problem when you fear answering the telephone or opening your mail because it might be another demand from your creditors. Late payments turn into missed payments and missed payments turn into bad credit. But what can you do when you have poor credit and need serious debt relief? Debt consolidation and debt settlement provide relief in different ways. Debt ConsolidationYou've probably seen a thousand debt consolidation TV and radio commercials. Yet, you probably still wonder how debt consolidation will work for you and what the process involves. One type of debt consolidation involves a debt consolidation loan. You have several types of loans to choose from. For example, if you're a homeowner, then you can take out a home equity loan, normally a second mortgage. A home equity loan allows you to pay off credit cards and possibly receive some extra cash. There is danger, though, in adding unsecured credit card debt onto your home mortgage. Losing your home is much worse than having bad credit. A debt consolidation service works differently than a debt consolidation loan. Some companies offer to help you formulate a plan to repay creditors at a reduced interest rate. In turn, you pay the company a fee and lowered monthly payments. The company distributes the funds to your creditors and may provide money saving strategies. The benefit is a lower interest rate, but the fees you pay may negate potential savings. Debt SettlementDebt settlement works by working credit card with your creditors to settle your total debt. This program, unlike debt consolidation, seeks to reduce the overall balance of your debts instead of simply lowering the interest rates you're currently paying. Depending on the creditor's willingness to settle, you might only pay significantly less than the total amount owed. Another benefit of debt settlement is that the company acts as a buffer between you and your creditors. Debt collectors retain the legal right to continue to contact you, but they usually honor requests, by mail or telephone, to speak to the debt settlement company representing you. You can also change your contact information and allow trained professionals handle collectors' harassing calls. Debt consolidation and debt settlement are distinctly different approaches to debt relief. Each has its benefits and drawbacks. Regardless of the method you choose, if you suffer from overwhelming debt, then you need to act now for debt relief. Author Bio: Scott Sumerford has several years of experience working in the financial industry and has written a myriad of articles on various financial matters. Read more about how Credit Solutions offers a viable alternative to debt consolidation.
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