Debt Negotiation – Consolidation and Settlement, When Are They Applicable?

There needs to be a clear cut analysis which needs to be done while deciding which is the debt program which is applicable for the customer. A lot of questions need to be answered in case when one needs to decide which relief service to opt for. Both of these programs have been made with the need to make the payment of debt easier for the customer. Both these programs follow the process of negotiation in which the customer needs to pay back the creditors at a mutually agreed rate of interest, mutually agreed amount and for a mutually agreed period of time.

The basic difference in the programs is the kind of debt which the customer holds. If the customer holds multiple debt and has been defaulting on multiple accounts he would need to consolidate his debt. By this we mean that the negotiation process which needs to be followed is for different creditors where the customer had defaulted on his payments. The second kind of debt is when the customer has defaulted on one single kind of payment. This would mean that the debt relief company would need to negotiate for one single kind of debt payment. In case of settlement the creditor makes payment to the creditor on the reduced amount which has been agreed upon for the agreed period of time. Where as in case of consolidation the customer makes on e single check payment to the consolidation company and the company in turn pays to the creditors.

In both the programs there is a regressive effect on the customers credit history. This means that the customers credit score takes a hit due to consolidation or settlement of debts. This lasts for a period of 2-3 years time. However once the payment is completed the customer the customer has a new credit history on which a new credit story can be written. The customer before getting into a debt relief deal needs to do a thorough analysis of the kind of debt he owns and what is the best suited for his condition. The second method is to go to a debt specialist who can logically analyze and say what would be best fit for his situation.

Source by Aditya Nath

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