Debt Settlement

• When you consolidate your debt, you are actually getting a new loan from someone at a better interest rate than you're paying on your existing debts.

  You take the money from the new loan, pay off the old debts, and carry the new balance at a better interest rate, therefore saving money.

• When you settle your debt, you aren't getting a new loan at all. You (or someone on your behalf), negotiates with your creditors to lower interest rates, penalties, and the balance you owe. When a creditor is willing to take less, you save money.

While you can negotiate your debts without any help, most people elect to use a debt settlement service from a company specializing in the process. As part of an overall debt management program some companies will not only negotiate better payment terms, but will also act as a middleman between you and your creditors, collecting and distributing what's owed.

Where consolidation loans normally require collateral, most settlement programs do not require any security to enroll.

Some companies offer both debt consolidation and settlement services; first negotiating what's owed down to the smallest amounts possible, then consolidating the remaining balance.

Before you decide on any debt settlement service, be sure to shop around for the best rates and payment options. Take the time to become well informed about each company that you check out so that you can be confident in whoever you decide to work with.