Debts have become a major burden for many during this recession.
Especially, the credit card debts have been the highlights due to their higher interest rates.
Due to this there a lot of debt relief options which have gained popularity.
Some of the debt relief options are custom made for certain customers so as to easy their debt management strategies.
While, there are other options which have a minimum qualifying criteria and can give respite to all who are eligible.
Some of the more popular debt relief options are Debt settlement and debt consolidation.
This article will describe both these debt relief options.
Debt Consolidation as the name suggests means taking out one loan in order to pay off a number of other loans taken by the customer.
If a person has a lot of credit cards, then this debt relief method will be beneficial.
Since the interest rates of credit cards are exceptionally high, it makes more sense to take out another loan from a bank with a lower rate of interest to pay off these loans.
Many opt for this option in lieu for a fixed rate of interest or an extended time period and sometimes it is also possible to negotiate on the total outstanding balance.
Debt Settlement is a process in which the debtor can negotiate a reduced total amount to be paid to the creditor.
The credit card companies agree to this option only if the debtor is about to file for bankruptcy.
In case the debtor does go ahead with the threat of bankruptcy the credit card companies will not be able to retrieve the money which had been lent and it will be a total loss to them.
Hence a good debt settlement negotiation can get a debtor a relief of up to 60 % reduction in the total outstanding balance.