Best Debt Relief & Settlement Companies of May 2024 – Forbes Advisor – Technologist

If you’re not sure about debt settlement, there are other ways you can handle your debt that might have less of an impact on your credit score. As you decide what to do about your debt, make sure you’re choosing an affordable solution. For example, don’t pay off your debt with a loan secured by your home, because if you get behind on payments you could lose your home.

Here are some other options:

1. Meet with a credit counselor to create a personalized debt reduction plan you can afford.
2. Take out a personal loan and pay off your debts that way.
3. Consolidate your debts onto one credit card.
4. Tap into your home equity via a HELOC to pay off your debt.

Debt Settlement vs. Debt Consolidation

Debt settlement and debt consolidation are different approaches to managing multiple debts. Debt settlement negotiates a lower amount owed, while debt consolidation merges debts into a single payment. Debt settlement is for those struggling to afford current debts.

On the other hand, debt consolidation is beneficial for streamlining payments and possibly securing a lower interest rate. It typically involves options like personal loans, cash-out refinances or low-APR credit cards. While applying for new credit may cause a minor credit score dip, debt consolidation itself doesn’t harm your credit.

Related: What Is Debt Consolidation & How Does It Work?

Debt Settlement vs. Bankruptcy

Debt settlement and bankruptcy are options for managing overwhelming debt, each with its own advantages and disadvantages. The two main differences between these options are your debt status and credit status.

With debt settlement, you’ll still owe money, but it may be less than what you initially owed. However, your credit can be repaired in a much shorter amount of time than with bankruptcy. Similarly, you won’t have the stigma of a bankruptcy on your credit report, which can affect your ability to rent and get employment.

Bankruptcy allows you to be debt-free, but the price is having it show on your credit report and public records for up to 10 years.

The choice between debt settlement and bankruptcy should depend on your circumstances and financial goals. Speak with a financial advisor or debt counselor if you’re unsure which path is best for you.