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This is the difference, to use a cliché, between night and day. You probably know what a debt consolidation company does. This is a company from which you take another loan in order to pay off every other debt that you have. This gives all sorts of benefits, including the ability to only have a single monthly payment, various effects that can help your credit score, the ability to move from secured to unsecured or vice versa. It even allows you to just generally refinance, in order to get a lower interest rate or extend your loan over a greater period of time.

Debt settlement, by contrast, allows you to pay money for the only part of consolidation that can possibly decrease your credit score. This is that the consolidation company, for the most part, will bargain with your creditors in order to decrease the amount of money that you owe. Sometimes, they will try to convince your creditors that you are near bankruptcy, to scare them into lowering the amount of money that you owe. Although, though you only have to pay a fraction of what you would have had to pay otherwise, this will show up on your credit report as a strike against you. That is the only thing that a debt settlement company does. Most debt consolidation companies will do it for you for free, as all of their profits come from the interest that you owe. Therefore, for the most part, debt settlement companies are a scam, and not worth your money or trouble. You can get far more from a consolidation company and at a much lower cost. In fact, considering that you will no longer have to pay money to your previous creditors, consolidation is entirely free. Especially considering that your current financial situation is probably relatively strained, you definitely don't want to be paying for something that you can get for free. And finally, consolidation companies help you plan for the future, with a comprehensive financial planning service. You don't want to find yourself back in this debt hole again. And that is something else that debt settlement companies don't do for you.

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