Debt consolidation enables you to pay off your entire debt with lower interest rates. Debt negotiation lowers your debt level with impacts on your taxes and credit report. Debt consolidation has the least affect on your credit score and helps you get better credit terms in the future.



Debt Consolidation’s Pros And Cons

To consolidate your debts, you can choose to take out a home equity loan or use a debt management company. Home equity loans allow you to lower your rates and write off your interest payments on your taxes. You also can have lower monthly payments by extending your payment period.

A debt management company handles payments on your unsecured debts. They will negotiate a lower rate with creditors, enabling you to pay back your debt quicker. You send them one payment, and they handle your accounts.

With either type of debt consolidation, your credit will lower slightly. However, by making regular payments and not opening new credit lines, your score will quickly rebound.

You also want to make sure you find a reputable company, whether for a home equity loan or debt management. Researching companies online is the best way to ensure you are getting the best service and terms.

Debt Negotiation’s Pros And Cons

Debt negotiation is when a creditor reduces your loan amount through an arrangement made by you or a debt negotiation company. Not all creditors will reduce your debt, even if you work with a third party who specializes in debt reduction. However, some will reduce loan amounts if they believe you will go into bankruptcy.

Debt negotiation affects your credit score like a bankruptcy. Creditors report your failure to pay the full amount, which will be on your record for seven years. But after at least a year, you may find credit with some subprime lenders.

You also have to report reduced debt as earned income to the IRS. You will have to pay a federal tax and in some cases a state tax.

Finding Help

If you are swimming in debt, debt consolidation and negotiation are options to consider. While reducing your debt quickly is appealing, understand the long term affects on your credit score.

Here are our recommended debt consolidation companies online:

Get a Debt Reduction Quote Here - FAST (Powered By Guide To Lenders) - Bad Credit OK - $2500 Min. Debt Amount - No Commitment - No Soc. Sec. # Needed - Quick Application - Non-HomeOwners Welcome: