Debt Settlement vs. Debt Consolidation: Is Debt Consolidation for Bad Credit the Right Option? The debt settlement vs debt consolidation decision-making process can present something of a challenge. However, choosing the correct method for settling credit card debt, small loans or medical bills is not nearly as complicated as it may initially seem. Debt Settlement Vs Debt Consolidation Those who wish to consolidate debt with a loan will be settling credit card debt, medical bills and small loans and making a single payment instead. The intention is to comply with the T&C’s of existing credit agreements whilst reducing the amount of interest paid and simplify family finances. A debt settlement program involves reducing someone’s income-to-debt ratio in order to improve affordability. Unlike consolidating debt, a professional negotiator will attempt to reach an agreement to write-off up to 50% of the principal. The remainder will be paid-off over a 12 to 36 month period. Debt Settlement Vs Debt Consolidation for Bad Credit Consolidating debt with an adverse credit rating is rarely a sensible move for those who have an impaired credit history due to missed and late payments. Unsecured loans for settling credit card debt, small loans and medical bills are difficult to find, let alone at an affordable interest rate. When an adverse credit history does present a problem, the consolidation of debt may only be possible through a loan secured on property. Turning unsecured into secured financing is rarely the right idea as it gives creditors and collection agencies greater rights should the borrower default on the agreement. Most individuals with a poor credit history will be better suited by opting for a debt settlement program. This is because no further interest will need to be paid, unsecured debt won’t become secured on the family home and any personal debt owed will be cleared far sooner. Settling Credit Card Debt Without an Adverse Credit History An individual who has always paid their debts on time is far better placed to take out a debt consolidation loan. All the best loan deals will be available which makes settling credit card debt, medical bills and small loans both easy and cost-effective. Whilst debt consolidation is likely to be the preferred option, it is important that the term isn’t extended for longer than is absolutely necessary. This is because the amount of cumulative interest increases when a debt is prolonged. Consolidating debt may also be a poor option for those who have a high income-to-debt ratio. The higher the proportion of income that goes towards servicing personal debt, the greater the likelihood of that borrower defaulting further down-the-line. The debt settlement vs debt consolidation decision-making process becomes far easier when an adverse credit history is taken into account. It is possible to clear debt more quickly with a debt settlement program, but it will affect personal credit scores. Only those with a poor credit history and an income-to-debt ratio stand to benefit.