Debt consolidation and debt settlement are both forms of debt relief that may help you manage your debt, but they have very different functions. In general, debt consolidation reduces the number of creditors you owe, while debt settlement reduces the total debt you owe.

What is the difference between debt settlement and debt resolution?

Yes, there is a difference between debt resolution and debt settlement but the objectives of both are the same: to reduce your debt to an amount you can pay off and become debt free. Debt resolution requires the services of an attorney. Debt settlement does not. Debt resolution does not require missed payments.

Is debt settlement bad for your credit?

Yes, settling a debt instead of paying the full amount can affect your credit scores. Settling an account instead of paying it in full is considered negative because the creditor agreed to take a loss in accepting less than what it was owed.

How is debt consolidation used to settle debt?

This method is most often used to settle a substantial debt with a single creditor, but can be used to deal with multiple creditors. Debt consolidation is an effort to combine debts from several creditors, then take out a single loan to pay them all, hopefully at a reduced interest rate and lower monthly payment.

What are the pros and cons of debt consolidation?

The pros and cons of debt settlement and debt consolidation vary, especially with regard to the amount of time it will take to eliminate debts and the impact it will have on your credit score. Both aim to make your debt more manageable.

How long does it take to get a debt consolidation loan?

If you have a poor credit score, you might be denied a debt consolidation loan, or the interest rate on the loan might be the same as the interest rate on your credit cards. Time can also be an issue. You should be prepared to spend anywhere from 2–5 years in a debt consolidation program before eliminating the debt.

What are the drawbacks of debt settlement?

If you are paying a debt settlement company to represent you, here are drawbacks you should consider: Additional Fees– Debt settlement companies often encourage you to stop making payments to your creditors while they negotiate a settlement.