What is the difference between debt settlement and debt relief? How does it affect ones credit report?
Question:
Answer:
A debt settlement is an agreement between a debtor and a creditor to fully satisfy a debt for a reduced payoff amount. A debt settlement is usually reached when a debtor is unable to fully meet his/her debt obligations due to financial hardships and attempts by the creditor to collect on the debt have failed. The creditor agrees to cancel part of the debt and accept the remaining sum as full repayment. Debt settlement is also called debt negotiation. Technically speaking, a debt settlement is the agreement while debt negotiation is the process through which both parties reach that agreement.
Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. It concerns in particular the Third World debt, which started exploding with the Latin American debt crisis (Mexico 1982, etc.).
Debt settlement usually means you settle for less than what you actually owe (bad mark on credit)
Debt relief usually involves consolidating your payments into a single loan. (if reported on your credit it is also a bad mark)
Usually all fast fixes will leave some negativity on your report. Best to try to take out a single loan and pay off your smaller higher interest rate debts first. Or transfer high interest credit cards to lower interest credit cards. It would also be possible to find a private investor who will take over your debts (pay off your creditors) without reporting that it is another loan that is paying off the creditors.
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