Debt Settlement vs Debt Reduction
Debt settlement and debt reduction are two terms that you may hear frequently when you start your foray into seeking debt relief. And when these terms come on your radar, they may sound eerily similar. After all, they share a common goal; that is, they both seek to assist in digging you out of debt and finding your way into financial freedom. But are there any differences?
The short answer is no. Debt settlement and debt reduction services both rely on a company negotiating with your creditors to reduce your debt down by 40 to 60 percent. The company will then deal with your creditors as long as you make your reduced payments to the company in a timely manner. They also hold the same risks: The IRS will deem such a reduction a gift that needs to be reported, and your credit score can be impacted negatively, since it could take up to four months to a company to start taking care of your debt.
However, while the term debt settlement is used exclusively to describe this process, the term debt reduction is oftentimes used in a broader sense to describe lowering your debt in general, regardless of method. As a result, the term can be occasionally misconstrued to represent the process of debt consolidation, which is in fact a completely different service. Being aware of this may make it easier to conduct research as you embark on your quest to see what service is right for you.
However, if you find that a debt settlement or a debt reduction service is something that works for you, then it really doesn’t matter what it’s called. If it ultimately helps you to eradicate your debt, you may end up calling the service a life saver.
The short answer is no. Debt settlement and debt reduction services both rely on a company negotiating with your creditors to reduce your debt down by 40 to 60 percent. The company will then deal with your creditors as long as you make your reduced payments to the company in a timely manner. They also hold the same risks: The IRS will deem such a reduction a gift that needs to be reported, and your credit score can be impacted negatively, since it could take up to four months to a company to start taking care of your debt.
However, while the term debt settlement is used exclusively to describe this process, the term debt reduction is oftentimes used in a broader sense to describe lowering your debt in general, regardless of method. As a result, the term can be occasionally misconstrued to represent the process of debt consolidation, which is in fact a completely different service. Being aware of this may make it easier to conduct research as you embark on your quest to see what service is right for you.
However, if you find that a debt settlement or a debt reduction service is something that works for you, then it really doesn’t matter what it’s called. If it ultimately helps you to eradicate your debt, you may end up calling the service a life saver.