Credit Card Settlement vs Debt Consolidation

Credit card debt is a huge stress factor for many people. Eliminating that credit card debt owed is a big step in attaining financial freedom.

Two of the most popular ways people are eliminating the financial burden of credit card debt is by credit card settlements or debt consolidation.

Credit card settlements are one of the fastest and cost effective ways to eliminate credit card debt. It is often very effective for those with a large amount of credit card debt that they want to get rid of as soon as possible.

With credit card settlements you only have to pay off a portion of what you owe – not the whole balance. In general, most credit card companies will settle debt for 30 to 50 percent of what is owed but some will ask for 75 to 80 percent of what is owed. It is also very beneficial because when the debt is settled, you are able to avoid paying hundreds or sometimes thousands of dollars in interest payments.

Everyone can ask their credit card companies for a debt settlement. The decision is based on the credit card company’s policy on debt settlements and your personal financial situation. They will also often ask for income statements and other information on your bills.

Debt consolidation is often done by taking several different credit accounts and turning them into just one account at a lower interest rate. Consolidating debt can save hundreds or thousands of dollars in interest rate fees, but it doesn’t eliminate the debt. Besides the lower interest fees, the single account to have to pay off is often a large benefit to borrowers because they only have the one debt instead of many debts to pay each month.

Check with your bank or credit union about debt consolidation loans to consolidate your debt. Most will work with you in a favorable way since you already have an account with them. Internet searches may show up great rates but some are not realistic and may not have your best interests in mind. If going this route, make sure you do research before agreeing to anything.

The most important difference between credit card settlement and debt consolidation is that when you consolidate debt you still have to pay off all of your debt in full. With the credit card settlements you only end up paying a portion of what you owed.