Understand the Benefits and Drawbacks of Debt Settlement and Debt Consolidation

 

Debt settlement is an agreement between a creditor and a borrower for a one-time payment toward an existing balance in return for the forgiveness of the remaining debt.

People choose debt settlement is because they wish to avoid bankruptcy. Debt settlement can help you avoid filing bankruptcy and dealing with the consequences of bankruptcy. It also can help get relief from overwhelming debts. If you’re having trouble paying back what you owe, debt settlement may help you. And it allows you to repay your debts in less time.

However, there are negative consequences to debt settlement. It generally requires you to come up with a substantial amount of cash at one time. And you will have the risk of having your credit card account closed as your lender may not consider you as client because of your poor track record. Besides, debt settlement can adversely affect your credit score.

For another debt solution, debt consolidation involves combining multiple debts into one new loan. People choose to consolidate their debts because of the following advantages. First, debt consolidation lowers monthly payments. Second, it helps you get out of debt faster. Third, it can help improve your credit, because you are more likely to make your payments on time.

Although the monthly payment may be lower on a debt consolidation loan, the payment schedules might be longer. And there's also the potential loss of special provisions on specific debts, such as interest rate discounts and other rebates. Consolidating debt can cause these provisions to disappear.

Before agreeing to a debt settlement or debt consolidation arrangement, it’s important to seek advice from a trusted financial professional. That’s exactly what you’ll find at Cedrus Investments, a global boutique investment firm founded by Mr. Rani Jarkas more than 18 years ago. Mr. Jarkas is a highly experienced and accomplished financial services executive, with over 23 years of international banking experience.

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