Should I Work With a Debt Consolidation Company to Get Out of Debt?
To understand what a debt consolidation company actually does, first, you must understand the definition of debt consolidation.
Debt consolidation is the practice of using one loan, usually a personal loan, to pay off all other outstanding debts. That way, you are only responsible for making one single monthly payment instead of multiple payments to different companies.
Often, if you consolidate your debt into one loan, that monthly payment will be lower than the combined payments you had been making before. The drawback of using this solution is that the term of the loan may not be as favorable as your previous arrangements. This is because either the interest rate may be higher or the length of the loan may be longer. In other words, you might end up paying less monthly, but more in total, when you add up all the payments over the entire loan term.
Debt consolidation companies sometimes also offer the option of paying your one monthly payment to them directly as a bill payment service rather than taking out a loan.
When is Contacting a Debt Consolidation Company a Good Idea?
If you’re drowning under the weight of multiple hefty monthly payments, you may benefit from consolidating your debt into one loan. For example, paying $500 per month to a debt consolidation company, even if it amounts to a higher amount in total over the life of the loan, might be more manageable. Instead of paying three separate credit card payments that could all total well over $1000 monthly, this allows for one easy payment.
What is Debt Consolidation versus Debt Settlement?
If debt consolidation means combining all of your debt payments into one singular loan, then what is debt settlement?
Debt settlement is a solution that lowers the total amount of debt you owe to your creditors. This is typically accomplished when a debt settlement company negotiates with creditors on your behalf to reach a mutually agreeable compromise. This is usually a fraction of the debt you would otherwise owe.
You can pay the agreed amount in a lump sum or with a monthly payment plan in many cases. Keep in mind that since your total debt owed will be substantially lower, your monthly payments for this outstanding debt may be much more manageable than the monthly payments you were trying to make before.
When is it a Good Idea to Work With a Debt Settlement Company?
Debt settlement can be a great option if you hold a lot of debt from things like medical bills or credit cards that you will never be able to pay off by making minimum monthly payments.
Debt settlement can also be helpful for people who owe a substantial amount to just one creditor. If you have an unmanageable minimum monthly payment for one credit card, for example, debt consolidation won’t help you because you’re already only paying one creditor. Debt settlement, on the other hand, could help you reduce the amount you owe to that credit card company and help you get out of debt much faster.
If you can’t afford to pay down your debts and you’re not able or willing to consolidate your debt into one payment, debt settlement may be your best option.
How can UmbrellaDEBT Relief Help You Get Out of Debt?
UmbrellaDEBT Relief offers debt settlement for credit cards, medical bills, and personal loans. Experienced debt negotiators from UmbrellaDEBT Relief work with your creditors to reduce your total debt, even if your accounts have already been sent to collections. Because every case is unique, your debt settlement plan may be completely different from someone else’s.
Contact UmbrellaDEBTRelief today to see what your unique path to financial independence could look like. Call or apply online to get started.