Debt Consolidation vs Debt Negotiation

Many people debate the subjects of debt consolidation versus debt negotiation because both of these options offer the opportunity for financial freedom. Determining which choice is best will depend on the individuals situation. Each of these solutions has benefits and drawbacks. Both must start with a careful examination of the personal financial situation. The consumer must decide what type of service, what they can afford to pay and what the ultimate outcome will be for the credit report. Consolidation and negotiation will be presented differently depending on whom the individual talks to and what their preferences are.

Consolidation companies will take the view that debt consolidation versus debt negotiation is not really two different things. Most companies can and will offer both services. Not only will they consolidate bills into one payment but they will negotiate with creditors for lower interest rates and cancellation of fees. They will assist with consolidation and repayment of the debt but this is not truly negotiation. It is important for the individual to understand exactly what service is available and how it will be utilized to increase credit and reduce debt.

When viewed from the negotiation side, this argument can be seen as something totally different. Negotiation involves bargaining with creditors for a smaller payoff amount. Most creditors are willing to settle for a reduced amount if the amount is paid in full. Negotiation services will work with the consumer to find the middle ground. This can be a long process, taking as long as 6 months to a year. Once a consumer determines what they can reasonably pay, the company will make a proposal for the individual to creditors. The consumer must have the money in the bank waiting when a settlement is reached as payment is needed immediately.

Because these two options are quite different, they will have different effects on a credit report. Negotiation may not repair credit but it will show that the consumer has paid the obligations in full which can go a long way with future creditors. Consolidation is usually reflected on a credit report as being in counseling. Some creditors view this as a positive step, especially since timely payments are reestablished. They may remove all negative information once the consumer has completed a consolidation program, but this varies by creditor. Reviewing the effects on the credit report is just one of many ways that the debt consolidation versus debt negotiation debate can be viewed.

This subject can be debated from a Biblical viewpoint. Some people may feel it is best to pay off everything that is owed, which is only accomplished with consolidation. Others feel that things like interest and fees are not necessarily valid obligations that must be paid back. No matter which side of the debate a person falls on, it is up to the individual to come to a final conclusion about spending habits. Isaiah 55:2 warns people about spending "Wherefore do ye spend money for that which is not bread? and your labour for that which satisfieth not? hearken diligently unto me, and eat ye that which is good, and let your soul delight itself in fatness." When debating whether to choose debt consolidation versus debt negotiation, a Christian consumer must take the words and teachings of the Bible to heart and make their own conclusions.

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