Debt settlement and debt consolidation services can be relied on to help you decrease your debt. The difference is that debt settlement removes part of your loans while debt consolidation decreases the rates of your interest. Despite the fact that the service with less impact on your credit score is debt consolidation, debt settlement is still considered a better option.

Lessen Your Debt

Debt settlement and debt consolidation services can both help you in reducing your debt. By negotiating with your creditors, debt settlement companies can help reduce the amount of your loans. After being charged with a fee, you can count on your reduced debt to remain in your credit score for seven years.

With debt settlement, your debt can be reduced from 10% – 50%.

It’s also advisable to pay the rest of your debt as soon as you can. If you don’t intend to use some of your accounts, then close them so you’ll have a better chance raising your credit score.

Meanwhile, debt consolidation tries to pay your high interest debts using low interest loans. Personal loans is also an option even if home equity loans have lower rates. Now that your debt has lower rates, you can make the same monthly payments and payoff the principal.

Implying Credit Score

It’s a huge deal when creditors see your decreased loans because of debt settlement. You are no longer suitable for conventional loans because of your dropped credit score. However, you do have the option to apply for a sub-prime credit after a year. Applying for lower rate conventional loans is possible after a few years of good credit habits.

Your credit may be affected a little once you try to consolidate your debt by taking out a loan.

Because your debt is not increasing, opening another account is a risky business. An option would be to close paid off accounts in the hopes of offsetting the penalty. But as long as you follow protocol you’ll once again be in good standing with your credit.

What are Your Financial Choices?

Everyone has different needs, so financial choices may differ as well. Additional loans are expensive even with debt consolidation having the least impact on your credit report.

For more extreme cases, consider debt settlement as a way to prevent bankruptcy. Before you make any decisions, determine what each company is offering when it comes to fees and rates. If you’re still seeking advice, consult with a credit counselor and let them help you by making suggestions about your finances.

About the author: William Phillips contributes to the private wealth management and lifestyle design sites.

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