Rising debt is a problem faced by an increasing number of people these days. Overlooking this matter initially can cause even a small debt to snowball, putting you in a tight situation later on. At such time people are primarily left with two options, either to opt for debt settlement or debt management.
These two might sound similar, but both these terms refer to two different strategies adopted by people struggling to reduce their debt. It is important to understand how these two terms differ to ensure you choose the best option for yourself.
Entering a debt management plan assures constant support of a professional advisor or counselor who will assist you in learning better ways of managing your money and help you in repaying your debt by taking advantage of privileges offered by creditors, like lower interest rates. He creates a workable plan considering your convenience and repaying ability, following which you can easily repay the amount you owe, while staying on a budget. Debt management plan, besides helping you feel confident by being in control of your expenses, also lets you improve your credit score. Entering such a plan also indicates your willingness to take up responsibility of your debts.
Debt settlement involves negotiating with the creditors for settling your debt. This can be done by making payments in lump sum. However, rather than repaying the full amount, you pay an agreed upon percentage of the entire amount of debt. In comparison to debt management, debt settlement is considered riskier. It might serve your current needs. however, it can have a long term negative impact on your credit score. In an attempt to settle many debts, you might pose an unreliable picture of yourself in front of lenders. Besides, it is far away from teaching you the essentials of good financial management, which are essential to avoid getting into such situation in future.
Both these plans are equally promoted by companies, but it is your decision to make a choice considering long term benefits and your convenience. Getting in touch with a counselor can also help to better analyze your financial condition and choose the more viable option.