Liz Crenshaw's Guide to Consumer Issues, Recalls and More

Ask Liz: Difference Between Debt Settlement and Debt Consolidation

By Katie Roberts and Liz Crenshaw
|  Sunday, Jul 21, 2013  |  Updated 6:36 PM EDT
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Ask Liz: Difference Between Debt Settlement and Debt Consolidation

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What’s the difference between debt settlement and debt consolidation? Is one better than the other for the consumer?

Consumer Attorney Sonya Smith-Valentine gave News4's Liz Crenshaw this answer: Simply put, debt settlement reduces the amount of your debt, while debt consolidation reduces the number of creditors you owe.

Debt settlement happens when you negotiate with a creditor to pay less than you owe -- normally a lump sum payment -- to resolve your debt.

Debt consolidation, on the other hand, combines all of your debts and allows consumers to make one payment to a company, rather than having to deal with several different lenders.

More information from the Better Business Bureau.
 

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