How Financial Strategies Debt Settlement and Debt Consolidation Are Different?

Financial strategies for debt settlement and debt consolidation are designed to enhance personal debt load. However, both work differently and are aimed to resolve different problems. Basically, debt settlement helps reduce the total debt amount you owe, while debt consolidation helps to decrease the total creditor numbers you owe. 

Debt consolidation

Debt consolidation means clearing multiple debts with a standard personal loan. Usually, debt consolidation is a good idea. It is feasible if the borrower’s credit score is reduced since they applied for original loans or they will not qualify for a low-interest rate, which is senseless. Before you read reviews on the Crixeo review platform for personal loan lenders, it is essential that you address your frivolous spending habit that led to poor debt management. 


  • It helps to streamline finances and you don’t need to feel concerned about multiple debts to pay and their interest rate. 
  • Accruing less interest on consolidated debt loans than individual ones allows you to pay extra and clear the debt early.
  • If your credit score is improved after other loan applications then you can get a consolidated debt at a low-interest rate. You can save money but ensure to shop around for competitive rates. 
  • For budgeting every month, consolidating debt loans is good because the overall monthly payments decrease.
  • Debt consolidation can enhance the score by paying multiple credit channels like credit cards. Stick committedly to on-time debt payments until you are clear, which can enhance your credit rating over time.


  • Coms with extra costs like balance transfer fees, origination fees, annual charges, and closing penalties. 
  • If your credit score is low then your interest rate on debt consolidation will go high than current debts.
  • As the repayment timeline restarts with consolidated debt, your monthly payment will lower but interest will accrue for a long. To avoid this increase the minimum loan payment. 
  • Chances that your default payment is high, so use autopay tools.
  • Ignore to resolve your underlying financial problems, which can drown you again in the debt cycle.

Debt settlement

Debt settlement means the creditors agree to settle and close the account. He willingly accepts a percentage of the owed amount and cancels the remaining debt. However, debt settlement has a bad reputation because it is an open ground for scammers. 


  • Get relieved from agonizing debt payments and repay the approved percentage of debt quickly.
  • Avoid bankruptcy because debt settlement is a suitable option for creditors as they can get back some of their money. If the borrower files for bankruptcy they may receive lesser money [chapter 13] or nothing at all [chapter 7].
  • Debt settlement does not end financial dilemmas, but stops the calls from lenders after an agreement.


  • Pay high debt settlement fees.
  • It can damage your credit score significantly.
  • You will still be responsible to pay tax on the reduced debt amount.
  • You can end up in more debt because the negotiations took some time. You were asked to stop debt payment but you can encounter delayed charges and accrued interest. 

If you consider managing debt strictly, then choose debt consolidation, but this will depend on your financial situation. If you are behind on payments and creditors are intimidating to prosecute then consider debt settlement. 

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