Debt Negotiation VS. Debt Consolidation

Debt negotiation and debt consolidation are available when we need qualified debt assistance. Whenever the monthly bills become too much for us, it really makes sense to use debt negotiation or debt consolidation for solving credit and debt issues.

Debt negotiation (settlement)

Sometimes, debt negotiation is referred to as debt settlement. This is offered to people who cannot call for a debt consolidation service. If we haven’t made payments in the last 3 months or simply cannot make the minimal payments for a debt consolidation plan, then the next step for solving credit and debt issues is a full qualified debt negotiation program.

The major benefit of a debt negotiation program is that we can stop making payments to the creditors. The debt negotiation firm takes all monthly payments from us and keep them in their account or even permit us to keep payments in our accounts.

While we are making the payments every month to the debt negotiation firm, they have to negotiate with the creditors for a lower exemption, somewhere around 40-50 percent of the final amount of debt. Once the settlement is negotiated and agreed by the creditors, then the debt negotiation firm makes a one-time payment to them.

Most of the debt negotiation firms require the creditors to make the credit report show as full paid once the account is settled. As long as we are in the program, the debt negotiation firm lowers the credit score.

The downside of the debt negotiation program is it also implies negative items and for that reason, some debt negotiation firms include a credit repair service. This service must be paid as a part of the negotiation program too.

Debt consolidation

The debt consolidation services usually have a prearranged debt repayment plans with collection firms. When we decide to sign up with a debt consolidation firm, they offer a lower monthly payment which is based on a lower interest rate, already arranged and discussed with the creditor.

A benefit of a debt consolidation repayment is that will stop the creditors to harass us as long as we make these lower payments month by month. This kind of payment is lower reported to what the credit card firms usually offer to us. Must be also mentioned this is often the best way to consolidate debt.

The negative part of the debt consolidation repayment is that we must cancel all credit cards included in the plan, we are charged when the first payment is made thru the program and an additional monthly administration fee must be paid. The ranges of the administration fee are flat fees $10-$50, but others charge a $5 fee for each creditor. A simple calculation says that we’re going to pay about $30 a month and this amount unfortunately doesn’t go to paying off the debts.

We must choose the debt consolidation program if we have higher credit card bills than we can manage or high interest rates. Usually, people prefer to make only one payment for all of their debts, to only one firm.


And now, that we have an idea about what debt negotiation vs. debt consolidation implies, you have to choose which one works well to solve your debt and credit problems.

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