Consolidate or Negotiate?

Managing debts is difficult enough, but add in the numerous choices available for relief and many people begin to feel overwhelmed. Debt consolidation has become popular in recent years, while debt negotiation has taken a back seat. Why? Mostly because people assume paying less than they actually owe is impossible to obtain and prefer to take the easy, single payment a month approach.

Pros and Cons

Debt consolidation has become more popular over the years, offering the convenience factor of requiring the debtor to make only a single payment each month rather than payments to multiple creditors.  What typically happens in a debt consolidation is a lender agrees to assume all of the individual debts of the debtor in exchange for a single loan payment to be made to them. In other words, you roll all of your debts into one lump sum payment, which is paid to a single lender who then pays all of the other debts. While this may stop debt collections and resolve individual debts, you are often left with one larger loan that, in many cases, carries a much higher interest rate.

Although debt negotiation has lost its appeal to some debtors over the years, the chance at modifying your old debt account to a lower amount owed is priceless. In many cases, you can secure an overall reduction in what is owed on the debt, a lowered interest rate and may even be able to temporarily suspend payment requirements. However, not all creditors are willing to negotiate, at least not initially. This makes the debt negotiation process a bit more tedious than consolidating debts, which could be what drives people away. If you have the time and patience, debt negotiations with your creditor are typically the best place to start your debt relief efforts.