Bill Consolidation Versus Debt Settlement

Most debtors with high credit scores chose debt consolidation over debt settlement, because consolidating debt with an installment loan will actually help raise the credit cards, because of the decrease in revolving debt and decrease in debt to income ratio after a borrower converts compounding interest to simple interest.

The only problem is that second mortgages and home equity loans have all but disappeared during the credit crisis. So before you get too excited about bill consolidation, make sure it is even available with your situation. In most cases it’s not available to the average homeowner, because these days borrowers need to be at 70% loan to value (30% available equity after the debt consolidation loan)to qualify for a secure debt consolidation mortgage.

Second, borrowers with lots of credit card debt usually do not have credit scores high enough to qualify, even if they did have enough equity in their home. With debt settlement, your debt to income ratio will immediately improve and offset and downturn in your score caused by using debt settlement.

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