Many people ask us; what is the difference between debt negotiation, debt settlement, debt relief or credit card debt negotiation. In essence, these words are very interchangeable. They differ a great deal however from that of debt consolidation. Debt negotiation companies deal directly with each creditor. They take the amount you originally owe, (say $10,000 to company A), and negotiate that down to $.20 to $.40 cents on the dollar. You would end up paying $3,000 to creditor A, if your account was negotiated down to $.30 on the dollar. If say, you had 5 credit cards owning a total of $40,000, there is a very good chance this could be negotiated down to at least half that or $20,000. This way, you are paying off a much smaller dollar amount over a shorter period of time.
Debt consolidation, on the other hand, simply takes over the payment of your bills from you. You make one monthly payment to the debt consolidation company, and they simply turn around and pay each of your creditor each month. This more than likely is something that you have been doing, or trying to do yourself anyway. There is no “debt relief” with a debt consolidation company. They may be able to lower you interest rate a few points, however you are still paying off the entire balance owed. Finally, a little secret they would prefer you not know about. These companies are reimbursed by the credit card companies (usually 15 cents on the dollar) for every dollar they collect from you.