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How to get out of debt I New FTC Laws I Does debt settlement work I Choosing a debt relief program I Debt Settlement or Debt Consolidation I Debt settlement and your credit I Can you settle your own debt I Understanding debt settlement fees I Debt settlement and your taxes I Can I be sued I Debt Help - Get Started today!
Difference between Debt Settlement, Consolidation and Counseling
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A 10 part debt relief guide |
 What is Debt Settlement?
Debt settlement is the process of negotiating with your creditors, so that you only pay a percentage of what is owed on your monthly unsecured debts. You can settle your debts on your own by contacting your creditors, but the more popular option to hire a professional debt settlement company.
Usually the debt is negotiated, so that you pay about 40-60% of what you owe. The negotiation amount depends upon (if applicable) how long the debt has been in collections, how badly the creditor needs to get paid, and how big of a risk you are of filing bankruptcy. Since your creditors realize that with bankruptcy they get paid almost nothing, they often agree to settle your debts instead.
Settling your debts will have an effect on your credit, but the effects aren't as bad as other debt reduction options. It is definitely a better option than bankruptcy, which will destroy your credit for the next 10 years.
The length of a debt settlement program varies, depending upon the settlement amount and your amount of debt. More often than not, debt settlement programs take approximately 12-36 months to complete.
What is Debt Consolidation?
Debt consolidation is a method of compiling all your unsecured debts together, so that you're only responsible for one lower monthly payment. Like with debt settlement, your monthly payments and interest are lowered. When you take out a debt consolidation loan, your monthly fee will go towards the debt consolidation company, which will proceed to submit payments to your creditors.
People often confuse debt consolidation with debt settlement. The two methods have similar principles, but with consolidation your principle balances don't get lowered. For example, if you possess $12,000.00 in debt and your creditors settle for 50% of what is owed, you would be responsible for a little over $6,000.00. In the case of consolidation, you still owe $12,000.00, but you pay if off in smaller increments.
What is Credit Counseling?
When people need advice on how to rid overwhelming debt, they sometimes turn to credit counseling. A credit/debt counselor evaluates your debt and budget, and forms a detailed plan for you to get out of debt (including a repayment schedule). Your counselor will then negotiate with your creditors, so that you pay lower monthly amounts and interest rates. Your income will also be taken into account, so the counselor can determine if the repayment plan is manageable.
While you undergo credit counseling, all your accounts will be closed, so debt cannot further accumulate. Plus, you must adhere to the budget set by your counselor. If you fail to make your payments, your balances and interest rates go back to where they were before you enrolled in the program.
Credit counseling is useful if you want to get out of debt and learn budget management skills. Each program generally takes 2 to 4 years to complete.
What is the Best Debt Relief Method?
It all depends upon your income and your amount of debt. For some people, bankruptcy is the only option. Any truly reputable debt relief organization will lead you in the right direction. For example, at Premier Debt Help, the debt counselors will inform you (during your free consultation) if debt settlement isn't a viable option for your financial situation. That's the beauty of a full-disclosure company. Debt settlement certainly is a preferred option for people who can pay off their debts, but their monthly payments are too high to fit their budgets. By choosing debt settlement over bankruptcy, you benefit both yourself and the creditors. You benefit yourself, because you won't destroy your credit for the next 10 years. And your creditors will be happy, because they're actually getting paid! When debtors file bankruptcy, they get paid close to nothing.
If debt settlement sounds like the most appealing option, Premier Debt Help offers the best debt settlement services in NJ and throughout the U.S.! The experienced debt counselors will be able to walk you through the debt settlement process and answer any questions you may have. Your debts will be reduced to affordable monthly amounts and you can get out of debt in 12-36 months!
GET THE FACTS
OK, so now that you have a better understanding of the differences between Debt Settlement, Debt consolidation and debt counseling and which is the best solution for your current situation, lets move on to part 5 of our 10 part debt settlement guide.
Go to
Part 5 - Will debt settlement hurt my credit? Learn the truth about what will happen in the short and long term of your credit history, reports and scores.
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