Debt Relief: Settlement vs. Debt Consolidation Loans

Debt Relief: Settlement vs. Debt Consolidation Loans

Working your way out of debt can be difficult to manage, but balancing multiple debts can seem nearly impossible. Many have found that combining multiple debts into one debt helps to streamline monthly payments and reduce the number of creditors that they’re dealing with. You can accomplish this through a debt consolidation loan or customized debt settlement program offered by Accredited Debt Relief, but which one is the most effective?

In this blog, we’ll review the major comparison points for both debt settlement and debt consolidation loans. While the best debt relief strategy for you will depend on your unique financial circumstances, we’ll shed light on each strategy to help you as you research your options.

Monthly Payments

Most people dealing with debt consider reducing their monthly payments and making them more manageable to be their top priorities. Both debt consolidation loans and debt settlement programs can help you reorganize your monthly payments, but they accomplish this in different ways.

When you secure a debt consolidation loan, you’ll use the loan’s funds to pay off your existing debts right away. This allows you to focus on one monthly payment and one loan rather than keeping track of multiple bills and due dates. If you’re lucky enough to secure a longer loan term, you may have lower monthly payments than what you were paying before. Unfortunately, this also means that you’ll have to deal with paying more in interest over time.

Debt settlement programs take a different approach. Before you begin your program, a Certified Debt Specialist will examine your finances and determine how much you can reasonably put towards your debt each month. Oftentimes, Accredited Debt Relief’s clients will only pay around half of what they were previously paying, which means they get to keep more money in their pocket every month. Additionally, reduced debt means that their clients are able to pay it off faster than they would have on their own, allowing them to put their hard-earned money towards the things that matter the most. 

Total Repayment and Interest Rate

Your credit score and credit history will play a big part in the kind of annual percentage rate (APR) loan companies will offer you. APRs on debt consolidation loans are usually between 8.31% and 28.81%, with the average being about 18.51%.

Annual Percentage Rate Comparison - Accredited Debt Relief vs. Debt Consolidation Loans

While a debt consolidation loan could help you secure a better interest rate than what you had before, it cannot reduce the actual amount you owe. You’ll still be responsible for paying back your debt in full along with interest.

Debt settlement programs do not have interest rates. Rather than paying your creditors directly, you’ll put monthly deposits into a Dedicated Account that you own. While deposits build up in this account, a team of negotiators will work on your behalf with your creditors to reach a settlement for less than what you owe. While results do vary, Accredited Debt Relief’s clients can receive settlement offers reducing their debt by about 50%.

Time Investment

The time it takes to pay off a debt consolidation loan can vary greatly. Your personal financial habits and the total amount of debt you have can affect the length of your loan. After all, your consolidation loan may have helped you secure a lower monthly payment and lower interest, but it also made multiple smaller debts turn into one big debt. If you’ve got a solid, consistent plan for paying off your loan, it might be worth it. If you struggle to make your monthly payments as it is, prolonging your debt through a loan might not be the best solution.

The length of a debt settlement program also varies because it’s customized to each client’s debt and unique financial situation. However, debt settlement aims to reduce the total amount of debt you owe, which means less prolonging and more progress. Individuals who choose Accredited Debt Relief’s debt settlement programs are often able to complete their program within 12 to 48 months.

The Application and Approval Process

After you’ve shopped around and found a loan that you’d like to apply for, you’ll need to submit your application and verification materials. These include proof of identity, proof of address, and verification of income.

If a lender considers you to be a risky borrower due to your credit score and history, you may be denied a loan altogether or offered a loan with a high interest rate. This means that you’ll either have to move on and start researching other providers or request a lower amount than what you were hoping for.

Qualifying for a debt settlement program is much easier, as a good credit score is not needed. Accredited Debt Relief also takes care to make sure that their clients are set up for success. They provide risk-free consultations and customize their debt settlement programs to fit each client’s needs.

Help From Debt Specialists

Another important factor to consider when choosing between a consolidation loan and a debt settlement program is whether you would prefer to have guidance along the way. When you apply for a consolidation loan, you’ll likely only receive help when first applying and signing for the loan. Once you’re locked into a new payment plan, you’re more or less on your own.

Debt settlement programs come with access to specialists who can help you throughout your program. Accredited Debt Relief clients have access to our Client Success Team seven days a week through phone, email and live chat. Our programs also regularly release helpful content and tools that can help improve your finances while in your program and beyond.

Comparison Chart: Debt Settlement vs. Debt Consolidation Loan

Weighing Your Options

There isn’t a debt relief option that works for everyone. Be sure to gain a clear understanding of your finances and research all of your options before pursuing a debt settlement program or a debt consolidation loan.

Reviewing your debt with a Certified Debt Specialist may help to provide the clarity you’re looking for. Accredited Debt Relief provides risk-free consultations to individuals throughout the U.S. who are looking to take back control of their debt. Contact them today to learn more.