Debt Consolidation vs Debt Settlement In California

If you live in the State of California and you are looking at ways to help you get out of debt you can either do a debt consolidation or debt settlement. Both are very similar as they both are meant to erase the debts you have accumulated but with a few minor differences.

Debt settlement is the process of working with a company to help negotiate your outstanding debts with creditors to a lower amount. Creditors will not work with you until you stop making minimum payments. After that point is when you will start being contacted by your creditors asking for payment. After you have researched a debt settlement company to help you is when they will start calling on your behalf to your creditors. The process can take awhile as many creditors want all of the money you have borrowed as you did make an agreement with them to pay it back. The debt settlement company will charge a fee but you should find one that only charges one if a settlement is reached on all of your debts. You will want to have enough cash saved up ahead of time before contacting a debt settlement company. Without money in the bank they cannot go to work for you to negotiate a lower amount or even a small monthly payment.

Debt consolidation is just that. Its a attempt by yourself to put all of your debts into one monthly payment. If you do not have a secured piece of property like a house where you can refinance the debts into your mortgage then a debt consolidation loan will work. You go through the same process as working with a debt settlement company but here you are not looking to settle your debts. The goal is to find a company who will pay off your high interest debts and payments and put them into one loan where you make a monthly payment to the debt consolidation company. You are still paying on the same amount of debts but now you only have to worry about the debt consolidation loan and not all of the other companies you were working with. This route is the best as it will not ruin your credit as it looks like just another loan on your credit report. You leave in good standing with your past creditors as they do not know the difference.

Trying to do debt consolidation in California vs debt settlement really depends on how long you want to have your credit history bruised for. Debt settlement will leave some marks on it as your debts will say “settled for less.” This makes it hard to get approved on future credit lines. Debt consolidation is a quick and easy way where you put everything together to help you pay down your balances at a lower interest rate.