Both debt settlement and debt consolidation can cut and eliminate
your debt. But each will have distinct consequences on your prestige score
and hereafter financial options. Before selecting either option, educate
yourself on the pros and cons of each.
The Benefits Of Debt Settlement
Debt Consolidation Help
Debt settlement means that part of your debt is immediately wiped out
by your creditor. You will find instant financial relief in your monthly
budget. And the rest of your debt payments are much more manageable.
You will also find that you can start rebuilding your prestige from this
point on. Instead of juggling late payments, high debt loads, and other
factors, you can focus on managing your prestige better.
The Downside Of Debt Settlement
There are a few downside to debt settlement. The biggest one is the
immediate work on on your prestige score. Debt settlement is seen much like a
foreclosure; your score will be 500 or lower. And while you can enhance
your score, for the next two years you will have to work with sub prime
lenders.
You will also have to deal with the tax implication of a write off. The
Irs sees debt settlement like receiving a cash gift or income.
Depending on where you live, you may also have to pay additional state taxes.
The Benefits Of Debt Consolidation
Debt consolidation can also help you get out of debt. With
consolidation, a business negotiates lower rates with your creditors. You make one
monthly cost to the debt consolidation company, and they deal with
paying all your accounts.
They also deal with any paperwork hassles, canceling fees, and closing
accounts. Usually, you can be out of short term debt in five years or
less.
The Downside Of Debt Consolidation
Debt consolidation will have less of an impact on your prestige score.
Most lenders will temporarily put a hold on extending you more prestige
until they see you are development regular payments. You need to still monitor
your accounts to be sure the debt consolidation business is development on
time payments.
Picking The Right One
There is no excellent clarification for getting out of debt. Debt settlement
can help you see an instant revision in your finances, but at the
cost of your prestige score. Debt consolidation simplifies the process with
minimum work on on your credit, any way it does take time.
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