Debt Consolidation Or Debt Settlement: How Best To Clear Your Debts

Debt can become a crippling weight on the shoulders of honest borrowers, so much so that eventually a deal is needed to clear the debt. Bankruptcy should always be the last resort, and before that stage, debtors can choose whether debt consolidation or debt settlement is the right course of action.

Deciding which of them is the right option has a lot to do with specific circumstances, and whether the entire debt can be covered by a single consolidation loan, or if only a percentage of the debt can be handled.

Choosing debt consolidation may be more expensive in the short term, but unlike debt settlement programs, they do not have a detrimental effect on credit records.

So, which is the best one to choose? Which can be of the greater benefit? Understanding the difference can help in making the right decision.

The Consolidation Option

When choosing whether debt consolidation or debt settlement is the right option, it is important to look at the advantages and the mechanics of the two options. There are definite benefits to both, but depending on the financial situation, one can be more suitable than the other.

When it comes to choosing debt consolidation, it is important to note that this means all debts are repaid in full. It does not involve agreeing any reduction in debt, and therefore no savings are made. Basically, a consolidation loan is secured to repay all of the debts in one go. And with the right loan terms, the monthly obligation becomes more affordable.

Basically, if 5 loan balances add up to $50,000, with their interest rates varying from 9% to 15%, and combined monthly repayments of $800, consolidation sees the balance replaced by a single loan of $50,000, with one interest rate and a longer loan term, ensuring repayments fall to perhaps $400. Debt settlement programs provide a very different solution.

The Debt Settlement Option

Whether opting for debt consolidation or debt settlement, the purpose is the basically same – the weight of debt is lifted, and hopefully for good. But while debt consolidation has its advantages, in some situations debt settlement is the best option, not least because only a fraction of the debt needs to be repaid.

The essence of settlement is the negotiation that takes place prior to it. This is where the savings are secured, with required payments sometimes falling to just 30% of the actual debt figure. Choosing consolidation loans means that 100% of the debt is repaid, so effectively no savings are made at all.

Central to any debt settlement program is the introduction of a strict financial regime, which effectively controls what is done with the limited finances available. And while bankruptcy sees the credit affected for 10 years, the settlement affects credit options for just 2 years.

Choosing The Right Option

So, which is the best option, debt consolidation or debt settlement? The answer is often a simple matter of mathematics. For example, calculating the amount of excess income by taking your total expenditure from your total income, is essential in any loan application – and choosing debt consolidation is much like choosing simple loan.

But in choosing a debt settlement program, it is important to note that a professional settlement negotiator is needed to hammer out a good settlement deal. These will charge a fee.

Also, the deal is dependent on the ability to make a lump sum settlement payment, so if the deal is to pay 40% of a $100,000 debt, $40,000 needs to be available to pay immediately.

Debt Consolidation Loans For Bad Credit Borrowers: A Practical Solution To Financial Woes

When financial troubles have grown to a degree that managing them has become a real challenge, the search for a practical solution must begin in earnest. Meeting payment obligations regularly may have become too difficult, but what can be done? The availability of debt consolidation loans for bad credit borrowers provides one route out of the financial quagmire.

Consolidation is all about bringing together all of the existing debts and clearing them all at once. This basically means that the troublesome debts are removed and replaced by a single, more manageable debt. The motivation behind clearing existing debts in this way is that it effectively lifts the pressure immediately.

But there are conditions to getting a debt consolidation loan, even if it is designed to benefit those of us in very poor financial positions, and with very poor credit ratings. And qualifying for the right program from the right lender is crucial to ensuring the success of the strategy. But what options are there?

Advantages Of Consolidation Loans

There is no doubt that taking out debt consolidation loans for bad credit management purposes is a wise move. When repaying existing loans becomes too difficult, many people opt for bankruptcy, but this decision comes with severe consequences.

Unlike bankruptcy, clearing existing debts through consolidation does not result in a black mark being put against your name. Your credit is not removed for 2 years, and it is possible to seek other loans immediately (though this is not advised). Crucially, there is no stigma attached with consolidation.

There are practical advantages too. The fact that the debts are cleared means that the credit scores is improved, which means better terms for future loans. And with lower interest and a longer repayment terms, the monthly repayments on the debt consolidation loan are low, freeing up extra funds for other bills.

Alternatives To Consolidation

While choosing debt consolidation loans for bad credit management is an effective method of dealing with debts, there are other options out there. However, they have various positives and negatives that should be considered.

For example, a payday loan can be used when debts are low, with lenders granting funds of no more than $1,500. The reason is that the loan is granted against an upcoming paycheck, so the loan needs to be kept as low as possible to allow repayment in one go.

When clearing existing debts, this might seem like a practical option, but while it can be affective it is also very expensive. The interest charged on the loan can be as high as 35%, and the repayment term can be as short as just 14 days. A debt consolidation loan is more reasonable.

Choosing A Consolidation Company

An alternative to getting a loan directly is to hire a debt consolidation company to take care of things. However, it is important when going through a professional service provider to get a debt consolidation loan for bad credit borrowers to watch out for unscrupulous operators.

A consolidation company will buy out the debt and then make a repayment arrangement with the borrower. However, there are extra costs to the interest charged, with a fee expected for the services provided by the company.

This is an effective way of clearing existing debts, but be wary of companies that seek an advanced payment of their fees. This is illegal under financial rules, so any such request is a clear sign not to sign the debt consolidation loan agreement.

Debt Consolidation Loans For Bad Credit Management: What To Consider

Many Americans have suffered the same fate in recent years. After almost a decade of easy credit card and loan approval, the economic crises hit hard leaving honest borrowers with a mountain of debt before them. And for many Americans, the ideal solution is getting a debt consolidation loan for bad credit management.

It has been no secret that this solution is one of the most popular, but it is worth noting too that it is not a matter of erasing all debts – as some people think. Rather, it is a matter of clearing debts quickly by buying out the balances with a more affordable loan at a more flexible repayment structure.

What this means is that the crippling debt is replaced by a single debt consolidation loan, which must be repaid. This in turn means that applicants need to prepare their applications properly, so there are some issues that should be considered before submission.

When Clearing Credit Cards

One of the chief debts cleared through consolidation is credit card debt. But getting a debt consolidation loan for bad credit management means all debts can be cleared at the same time. This means a wide variety of interest rate structures need to be considered.

For example, a credit card may charge 22% APR on their balance, with the result that very quickly the sum owed becomes significant. When 4 or 5 cards are involved, then the debt can become huge. But it is important to consider the other debts too before agreeing consolidation terms, so when clearing debts quickly, everything can be managed effectively from the start.

What makes a debt consolidation loan so effective is that the whole financial mess can be wiped clean in favor of a more manageable situation. And it can only remove the financial headache if the monthly repayments are less than the combined repayments already being made.

Compare With Other Fast Loans

There are other options out there that might be considered too. Admittedly, it is hard to find any that offer the same kind of breaks, so getting a debt consolidation loan for bad credit repair is arguably the one everyone prefers to turn to.

But what is the main alternative? A payday loan is the key one, and is almost certain to be approved if the applicant has a large enough monthly income. The loan is granted on the back of an upcoming paycheck, and can be approved and deposited into an account in a matter of hours. So, it is ideal when clearing debts quickly is a must.

But it only suits small debt sums, with most payday loans maxing at $1,500. Anything more than that will need a more detailed loan agreement, with repayments over 90 days or so. Interest is also huge, as much as 500% APR, so a debt consolidation loan is clearly more affordable.

What Out For Unnecessary Charges

A third key point is the fee that debt consolidation companies charge. While it is always possible to get a debt consolidation loan for bad credit management independently, when the debt is very high, a professional service might be needed.

As service providers, the consolidation company will charge a fee, but remember that nothing should ever be paid in advance. If a company suggests that this be done, then it is best to walk away. The correct process is for the company to deduct the fee from the sum borrowed as it is deposited into your account.

Clearing debts quickly is always desirable, but remember there is always the risk of unscrupulous operators. So, check out the background of any prospective company before agreeing any debt consolidation loan with them. The Better Business Bureau website is the best option.

Short Term Loans: Overcome Sudden Financial Problems

Is your financial need a small and requires quick attention? But you have no funds to sort this unplanned expense which is bothering you? Well stop worrying about such a small problem because there is an instant solution to it. Short term loans are a great financial help that can be trusted for small financial problems at any time. The cash amount is provided easily on time without asking you to meet heavy formalities.

Are you facing impaired credit records like arrears, CCJs, bankruptcy, missed payments, defaults and IVA? Now, there is no need to worry about your bad credit because there is no credit check required.

Short term loans are an ideal financial solution that allows you to sort your urgent financial needs easily on time. You can borrow anything varying from £100-£1500 for a term of 2-4 weeks. In case if you are unable to meet the repayment on due date then you can roll over the term by paying additional amount.

Being short term loans these funds are offered at slightly higher interest rates as compared. By entailing short term loans you can easily fix up your small and sudden financial needs on time. With the borrowed funds you can pay off your car repair expense, pay for medical treatment, library fee, credit card bills, house rent or other such financial obligation can be easily met.

You can quickly get the loan approval if you fulfill the pre requisite condition. In order to qualify you must be 18 years of age, must have a valid bank account and must be earning a regular source of income. If you fulfill all the above requirements then you can get the approval within a short time span.

Short term loans are an instant relief to your problems as they get approved in less time. No credit check is done; no need to fax documents and no paperwork is required. The cash amount is easily transferred to your bank account.

Debt Consolidation Loans For Bad Credit Borrowers: The Route To Financial Recovery

It does not take long for debts to grow into something too great to handle. While some people will move quickly to file for bankruptcy to deal with such situations, it is not as wise a move as some believe. There are serious consequences, after all. The availability of debt consolidation loans for bad credit borrowers offers a more constructive solution.

Of course, in some cases, consolidation is not the answer, but before the problem of debt grows too great, consolidation can certainly help to achieve financial recovery. While clearing existing loans is the key point to the exercise, the method needs to be as effective and constructive as possible if the maximum benefits are to be enjoyed.

There are clear advantages in opting to get a debt consolidation loan to solve the problem. But as with all financial products, it is important to secure terms that ensure the new loan is affordable.

What Does Consolidation Mean?

Simply put, consolidation is where a number of elements are brought together in order to create a stronger situation. In financial terms, this means combining all the existing loan balances, and replacing them with a single loan debt. The idea is that, by getting debt consolidation loans for bad credit management, the pressure is lifted.

The biggest challenge when repaying debts is how to overcome the cash flow problem that debt inevitably creates. When there are 6 loans to repay, there are usually 6 different repayment schedules leaving little time for the debtor to catch breath. By clearing existing loans fully and in one go, just one repayment date remains.

And while the debt consolidation loan is in fact a debt, replacing 6 different interest rates with one means the cost of the debt is also lower. However, there are other important terms to agree too.

Why Bother With Consolidation?

The simple answer to that question is that it can turn things around quite dramatically. While it is true that getting debt consolidation loans for bad credit management purposes does not remove the debt (just replaces it), the terms of the new debt are much more manageable.

As a result, there is extra cash freed up to use for other purposes, if the monthly repayments are less than the combined repayments of the original loans. What is more, because the initial debts have been paid off in full, the credit score is vastly improved too, allowing for better terms to be secured on any future loans.

But, perhaps the best reason to opt for clearing existing loans through consolidation, and not through bankruptcy, is that there is no negative impact on your credit record. Bankruptcy usually means all or the majority of the debt is written off unpaid. However, through a debt consolidation loan the debts are repaid in full, so there is no black mark on your record.

Key Terms To Seek

So, what are the terms that should be secured to make consolidation the most effective possible? Well, with debt consolidation loans for bad credit borrowers, affordability is the key. And in that respect, interest rates and the loan term itself are hugely important.

Generally, online lenders offer the best loan deals, but some offer interest rates that are better than others. This is partly due to the fact the borrower has poor credit scores. However, it is the term of the loan that is the essential factor when clearing existing debts effectively.

Basically, the longer the term is, the more monthly repayments there will be. This means the principal sum is divided into more shares, which are smaller. So, a $75,000 debt consolidation loan repaid over 20 years is affordable, but over a 10-year period might not be.