| Read Time: 2 minutes | Debt Settlement

Debt Personal User

Personal interest rates for consumers are very low right now. This provides an incentive for all of us, in an attempt to achieve a cheaper interest rate and lower total charge, to take advantage of refinancing our personal loan debt. The phrases debt restructuring and debt consolidation used interchangeably are common to hear, but they are in fact somewhat distinct.

Consolidation Of Debt

In debt restructuring, you effectively merge all of the debt with a new borrower into one new loan. For instance, if you owe $1,000 to Credit Card A, $2,000 to Credit Card B, and $2500 to Credit Card C, you have three different payments, due on different days, all with interest rates of their own. You would call a new borrower, such as a local bank or online debt restructuring lender, to merge this debt and qualify for a new loan to fund the balance of your current mortgage debt, which will be $5500 in this case.

Pros of Debt Consolidation

It definitely makes it easy to manage, and is less time-intensive, to have 1 payment instead of 3. For the whole amount of debt, there is just one interest rate, and with the current low rates, you might save a lot of money. When you chose the terms of the new loan, there will be a more definite conclusion usually in terms of months: 36 months, 48months, 60 months, etc.

Debt Consolidation Final Reflections

Consolidating your personal debt, as long as you handle it properly, can be a smart idea. I also recommend that a comparative platform like Powerpay.org be used. It is free and user-friendly. In an attempt to decide whether a restructuring genuinely makes sense for you, this method would allow you to equate a debt settlement deal to what you are already doing.

Settling Debt

The resolution of personal consumer debt is mostly achieved by a so-called “debt recovery firm” that operates on your behalf to deal with creditors. The purpose is to achieve a lower interest rate on your existing balances or, preferably, principal repayment.

Pros In Settling In Debt

In the end, you can pay less than what you currently owe. The negotiating hassle is taken away from you and instead handled by the debt settlement firm.

Potential Cons Of Debts Settlement

You have to contribute directly to the debt management firm, not to the creditors. As a result, when the debt management firm negotiates with them, the creditors sometimes don’t get paid for months. Since you are technically defaulting on several purchases, this will have a huge negative effect on your credit score.

Final Reflections In Debt Settlement

Although you might end up spending less via debt payment than you would have without it, your credit score could have negative effects. To help make the right choice for you, be sure to read the fine print and contact a qualified financial attorney or expert.


Author Photo

Blake Goodman received his law degree from George Washington University in Washington, D.C. in 1989 and has been exclusively practicing bankruptcy-related law in Texas, New Mexico, and Hawaii ever since. In the past, Attorney Goodman also worked as a Certified Public Accountant, receiving his license form the State of Maryland in 1988.

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