Can You Do Debt Settlement And Debt Consolidation At The Same Time?


It’s definitely confusing as whether you should choose consolidation, or settlement, to pay off your debts and be debt free.

Both have their own pros and cons, and both are wonderful and effective when you have huge debt amounts taking up the most of your monthly paycheck.

You need to understand both the debt relief options in total clarity, and then go for the one that you are most comfortable with.
In the meantime, our question is a bit different. We will discuss whether or not you can do both debt consolidation and debt settlement at the same time.

Well, not to keep you in the dark, yes you can do both of them together. But, it is tough, and technically quite impossible for you to do it alone.

So, without killing more time, let’s first understand both settlement and consolidation in full detail, and then we can decide how you can do both of them together.

What is debt settlement and how it works?

When you have debts that get difficult to pay off with time, say because of the interest rates or the amount itself, then all you wish for is your debts be lowered.

This is when you can take help of debt settlement, where your creditor will be accepting a lump sum payment for the debt, and be content with it.

Therefore, debt settlement is a process where you will negotiate with your creditor, and make him accept a lower amount and bring the debt obligation to an end, or mark the debt account closed.

But, it’s not at all easy to bend a creditor’s mind towards such an agreement. In fact, most of the time, when the debtor approaches the creditor for settlement, the creditor does not even bother to show interest in negotiation.

Hence, it is always advised form our end, that you should take professional help for accomplishing a successful debt settlement procedure.

But what do we mean by professional help? Well it is none other than enrolling yourself in a good settlement program offered by authentic debt settlement companies.

Once you get yourself signed under the program, the settlement company will contact your creditors and see how much can the debt amount be lowered. They will do the negotiation, and will let you know the last agreed upon amount, you will have to pay.

But, there’s one thing that really keeps settlement a questionable and debatable topic, as whether or not it’s really the best way to pay off debts.

That’s so, because to tell you the truth, settlement does hurt your credit score upto a great extent.

As in reality even though you are paying off your debts, still you are not paying it off in full!

You are paying back the creditor a lump sum, to compensate for the actual debt amount. Therefore, do expect your credit score to fall abruptly, once a debt account of yours gets settled, instead of payed back in full and complete.

Now,

What is debt consolidation, and how does this work?

Noting the most important characteristic, in debt consolidation you will be paying off your debts in full amounts, instead of making a partial lump sum payment like you’d do in settlement.

In its original sense, debt consolidation is bringing all your debt together, and converting it into a single debt.

How to do consolidation?

You can either do it yourself, or you can have a session with a debt consolidation company, to understand the best options that fit well in your case.

If you want to do it alone, then you will have to take out a consolidation loan, or any other credit line, that can cover the combined amount of all your existing debts.

Then with this new big debt amount you clear all of your previous debts. So, now you only have a single debt amount to deal with instead of running behind and making payments for, multiple debt amounts.

Even here, things can become lot easier if you work with a debt consolidation company. They will talk to your creditors, and arrange a single monthly payment for you.

Each month you make this payment to the consolidation company, and it will in turn distribute the payment among your creditors.

As you can see settlement helps you to reduce your debt amount, whereas consolidation will make it possible to have a single monthly payment.

Both combined, it will become a heaven like situation for becoming debt free.

So,

Can you do both consolidation and settlement at the same time?

I won’t say it’s impossible. You can pretty much go for both at the same time.

But all by yourself??

No, that’s something impossible, unless you are in very, very good terms with your creditor, and have been an extremely loyal customer in the past.

Mark my adjectives. See how strongly I am emphasizing them.

To use both the methods, the negotiation plays the integral role. The creditor must be persuaded and convinced to do both consolidation and settlement together.

Hence, it’s better you let the professionals do the job.

However, some fraud companies can make you believe that debt management is similar to doing both consolidation and settlement jointly, but in reality it is quite different.

In debt management, your interest rates are lowered, and your payments are arranged by the creditors. But, when doing settlement and consolidation together, you will be able to reduce your debt amounts, plus have only a single monthly payment for all your debts.

Doing settlement and consolidation at the same time, is a difficult and time taking debt relief process. You might even have to sit for multiple counselling sessions with the company you are assigning the job to.

Take your time and wisely handle your debts. If you see that the creditor by no means is going to accept both of them jointly, then you might be better off with any single one. Either settlement or consolidation!

Sources:

https://www.ovlg.com/debt-relief

https://www.investopedia.com/ask/answers/110614/whats-difference-between-debt-consolidation-and-debt-settlement.asp

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About the Author

I have practicing since 1998 representing New York clients. I represent clients in a variety of practice areas, including personal injury, car accidents, slip and fall cases, general business law, real estate, bankruptcy and debt management or settlement.