Suffering from debt isn’t such a strange thing. It actually weighs heavily on almost everyone’s shoulders through numerous loans and high-interest payment avenues, which hinder them from living financially sound lives. Fortunately, there are ways to help you slowly take control of your finances back. Debt consolidation or loan settlement generally represents the two most common ways of doing this. Choosing the right path for you is only possible when you understand the differences between these two methods.
In this blog, we will try to make sense of both options in simple terms so that it helps in deciding which might apply in your case.
Debt Consolidation Explained
Debt consolidation typically refers to those kinds of transactions in which an individual takes out one single loan for the total outstanding amount of several debts with lower interest rate. This single loan person can replace multiple payments with just one monthly payment and make his finances more manageable.
How it Really Works
- You borrow a new loan from a bank or other lending institution.
- The loan proceeds are used to pay off all debts.
- You pay a single monthly payment towards this new loan.
Benefits of Debt Consolidation
- Reduced Interest Rates: Lower rates are available for debts consolidated through loans compared to credit cards or payday loans.
- Easier to Manage Payments: Easier to keep track of payments when only one monthly instead of numerous payments must be made.
- Positive Impact on Credit Scores: The effects can be seen soon in the positive change of credit scores.
When You Should Think About Debt Consolidation:
- During the scenario when at least a person has a decent income and can afford the monthly installment.
- If you have a credit score good enough to qualify for a lower-interest loan.
- If you want your financial situation simplified so that it would be impossible to miss a payment again.
What is Loan Settlement?
Loan settlement, often called debt settlement, is the negotiation between you and your creditors regarding the reduction of the full amount owed to them. In this case, instead of paying the complete amount, you consent to a lump sum or reduced balance to settle your account.
How Loan Settlement Works
- You stop paying creditors and put money in an account to save for settlement.
- You can have people like Guardian Legal Solutions negotiate with creditors for you.
- Once an agreement is reached on the settlement amount, you pay the reduced balance, which the creditor considers settled.
Benefits of Loan Settlement
- Reduce the Debt Amount: You might end up paying significantly less than what you originally owed.
- Reduces Hazard of Bankruptcy: Loan Settlement is an alternative to declare yourself bankrupt according to the law which could leave a long-lasting effect on your future.
- Faster Debt Relief: With some negotiations, you can settle your debt faster than the time it takes to pay it all back.
When Should You Choose Loan Settlement?
- In case of having a heavy load of debt over your head that cannot be repaid through easy monthly installments.
- When you have already crossed the limit of payments and are being bombarded with collection calls.
- If you are seeking faster recovery from the clutches of debt but at a cheaper cost.
Which is Better for You?
Your financial situation and goals play an important role in answering the question: which is better between debt consolidation and loan settlement.
Debt consolidation is better if you’ve got multiple debts but can afford the monthly payments.
Loan settlement, on the other hand, is for people who need relief from the total amount owed because they cannot pay their debts in full.
How Guardian Legal Solutions Can Help
Guardian Legal Solutions specializes in negotiating with the creditors to reduce your debt if you’re considering loan settlement. Our team knows just how tough financial struggles can be and would be more than happy to provide a solution based on your case.
We enable the reduction of debt burdens while achieving complete financial freedom without the pressure of heavy payment schedules. Get in touch with Guardian Legal Solutions today to review your options, step up, and start your way toward a debt-free future.
Final Thoughts
You don’t have to drown alone in debt. You can visit debt consolidation or go for loan settlement. The most important thing is to make a decision. This is after you evaluate your financial position, resort to the available options, and seek advice from sites such as Guardian Legal Solutions.
It’s possible to conquer debt, and the right solution is waiting out there for you. Go ahead and launch your campaign for financial freedom today!