Debt settlement and debt consolidation are different ways to eradicate your unsecured debt.  The following article will explain a little about the two of these options and how they differ from one another.

Debt Consolidation

Debt consolidation loans can be another way to resolve debt and are frequently touted as an easy way to get out from under the burden of credit card debt. At first, it appears to make sense. Consumers use the equity in their homes to reduce the interest on money borrowed from 20-25% down to 6-8%. Additionally, consumers benefit from having one monthly payment on the new loan.

A consolidation loan, however, does not tackle the underlying issues that triggered the financial hardship in the first place. You used your credit cards, and continued to increase your credit card balances until only the minimal payments could be made. Using a consolidation loan to resolve credit card balances suddenly leaves many consumers with too much available credit. The source of this new credit; THE OLD CREDIT CARDS THAT HAVE NOW BEEN PAID OFF…

Many consumers convince themselves that they will only use their credit cards for emergencies now that they have been paid off. Typically, this does not occur. Unchecked spending habits normally result in raising credit card balances in a reasonably short period of time . All of a sudden, the credit card balances are right back where they were prior to the consolidation loan was taken leaving the consumer with the consolidation loan balance and maxed out credit cards. A recent study identified that nearly 2/3rds of consumers who applied for consolidation loans to resolve their credit card balances had the same or far more credit card debt inside of two years!

You may feel you can use willpower to resist the temptation of using credit cards for everyday purchases but willpower alone will not break this cycle. In order to put an stop to the perpetual debt cycle, you must alter the way you think about and use credit. Simply applying for a consolidation loan will not teach you what you will need to know.

Even if you are one of the few who has “learned their lesson” and you close your credit card accounts and refuse to apply for more credit, there is another issue with consolidation loans.

You will still owe the very same sum you did on your credit cards, and only a small portion of your payments will go to repay your balance. Despite the fact that you’ve decreased the interest rate, your loan may span 15 or even 30 years. To get an idea of how this works, look at your mortgage statement. It isn’t until the last several years on a mortgage that the principal is reduced. This is due to compounded interest. An equity or consolidation loan works in a similar fashion. Instead of getting those cards paid off in a couple of years, you’ll be paying off your loan for many years to come.

Perhaps the worst part of employing a consolidation loan to resolve credit card debt is that unsecured debt turns into secured debt. Credit card debt is unsecured, which means that the debt is not collateralized by property or assets. So if you default on a credit card debt, your creditor can call you, send threatening letters, and even acquire a judgment against you and, in some states, they can garnish your wages but they can’t take anything away from you.

The hazards involved with unsecured debts are almost nothing compared to the possibility of losing your home. If you pay off your credit cards with a consolidation loan, you have effectively swapped your unsecured debt for secured debt. This means that if you default on your consolidation loan, the bank can levy and suspend your home and in some cases even force the sale of your property to pay back the loan.

In other words, Consolidation Loans are NOT a feasible solution for resolving credit card debt. If you are still thinking about a consolidation loan as an alternative, you should cautiously research other options before committing your self to a loan that may take numerous decades to pay off.

Debt Settlement

Few people understand that there is another option to address your debt, an strategy that puts YOU in control. That option is debt settlement.

Just consider being able to pay much less than what you presently owe by making cost-effective monthly payments with no interest, wouldn’t that make a huge difference in your financial future?

Most people, when initially hearing about this concept, are skeptical that debt settlement can do the job. But if you have a expert debt negotiator doing work for you, it can make a substantial difference in how much you’ll pay as well as the time expected to eliminate your debts.

How is this possible? It’s very simple, actually. Your creditors are mindful that the probability of recovering money on delinquent accounts is reduced over time. They also know that bankruptcies are at an all-time high. If 3 to six months go by with no payment, the creditor might assign your account to a third-party collection company and must pay up to 1/3rd of what is collected as a fee for the agencies services. Another likelihood is that the lender may sell the rights to the debt to a third party for 5-15 cents on the dollar. Debt Settlement gives your creditors another option.

If your creditor has the alternative to collect about 50 cents for every dollar you owe, or to take a chance on never collecting a single penny by trying to hold out for the full sum due, it becomes an easy choice. They’ll settle.

You may think that it would be simple to just try and negotiate with your creditors by yourself. If you attempt to do this on your own, you are not likely to lower your balances as much as a professional debt settlement company. It is more possible that the collection representative will attempt to have you pay the balance as agreed. Even if you are in a position to negotiate a reduction in the sum you owe, the creditor will insist that you pay the settlement funds immediately.

Having a professional debt settlement company working on your behalf will result in greater savings for you and your family. Once the banks realize that they are talking to a professional who is acquainted with their techniques, they are suddenly prepared to talk about a settlement. An aggressive negotiator will constantly receive superior results than you could ever get by yourself.

Your creditors are armed with collectors ready to pressure you the second you fall behind. They have collection agencies and attorneys on their side. Doesn’t it make sense to have expert help on your side as well? Shouldn’t you work on bettering your finances and let experts deal with your creditors?

The S&N Debt Solutions approach to DEBT NEGOTIATION is simply the quickest and least costly method of resolving your debts. We are a leader in the Debt Settlement business, offering you the very best programs available.