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Some people use the words debt settlement and debt consolidation synonymously, though the two credit repair options are entirely different. While some people opt to negotiate settlements with creditors and then use consolidation to pay off all of their settlements in one fell swoop, this is not the standard method of repairing credit. Here is a brief explanation of the two individual methods:

Debt Settlement

When you are unable to pay your monthly credit card bills, a large late fee is charged at every occurrence. In a very short period, the amount owed to creditors can skyrocket until it is virtually impossible to pay off. Men and women that find themselves in this situation often employ a settlement agency to negotiate a reduced lump sum payment with each creditor. Your account is closed when payment is made but it is not closed in good standing.

Debt Consolidation

When you consolidate debt, you take out a single loan in order to pay off all of your credit accounts at one time. The loan amount is then repaid to creditors in a monthly payment that is custom tailored to fit comfortably within your budget. When you consolidate debt, all of your accounts are closed in good standing.

Overlap

Some people choose to use a consolidation loan to pay off their settled debt. They take out a single loan to pay off all of their reduced settlements at one time. Nevertheless, consolidation companies will not negotiate settlements for you, unless you expressly request (and pay for) both settlement and consolidation services.

Some consolidation companies do not deal with settlement whatsoever and you will then have to do business with two separate companies, or find a credit repair service that is willing to combine the two options for you. A consolidation company will never automatically negotiate settlements for you as part of their services, as the two means of settling credit accounts are at their core fundamentally different in nature.

In a nutshell, by a thoroughly researching and then comparing several debt consolidation services, borrowers will be able to qualify and determine the agency that meet your specific financial situation, plus the cheaper interest rate the market is offering. However, it's recommendable working with a seasoned and reputable debt counselor before even make any decision, this is the way you save time because of specialized advise and money by obtaining the best results in a reduced span of time.

Hector Milla is editor of the Reputable Debt Consolidation Companies website – where you can see his best rated debt consolidator service recommendation.

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Tags: Debt, debt consolidation, debt relief, debts