Debt management or debt consolidation: Which one is better?

Debt management or debt consolidation: Which one is better?

Feeling frustrated seeing the debt burden? You might wonder which strategy to implement. It is indeed difficult to decide if you should attempt debt management or debt consolidation.

Both of them have their pros and cons. You have to pick one based on your situation and requisites. Don’t follow others as their requirements might be dissimilar from yours!

Although debt consolidation and debt management might sound the same, they serve different purposes. Besides, they address different problems. Just because both the terms consist of the word ‘debt’, it does not mean they can solve the same problem.

Depending on the magnitude of debt, you can take out bad credit loans for debt payments. It only depends on the spectrum of your necessity. Above all, your affordability should decide what you should do with your debts.

Debt management can help you reduce the quantity of debt you owe. Therefore, basically, it addresses how much debt you hold. On the other hand, the debt consolidation method enables you to reduce the number of creditors you have to pay. In this case, it does not matter if you carry a large or small number of debts.

Still confused? To clear off your doubts on which way to choose to handle debts that are hard to bear for you now, you can take a glance at the information shared in this blog.

Fundamental difference

To finalize the strategies that would fit the best for your situation, understand both the concepts separately. You can do it here:

Debt management

It is also referred to as a debt settlement plan. This strategy lets you focus on some of the portions of the debt that you can pay off with leftover money you have. You will have to convince the creditor to settle an amount that is less than the actual amount of debt you have.

Make sure to carry the amount that has to be cleared off; otherwise, the creditor might not get ready to negotiate with you. It is a good option if you are out of cash altogether.

You have some emergency savings to meet the requirement of the creditor. You need to involve a third-party negotiator to approach the creditors. All your debts will be settled and regarded as defaults or late payments. Be alert as too much debt can show as a number of missed payments in your credit history.

Pros

You can waive off the total amount of debt without meeting the overall balance

You can get rid of debts even by paying off a smaller amount of money

Cons

It can affect your credit scores

It can hamper your odds of getting future credits

When is this option viable for you?

You can prefer debt management or a settlement plan if you deal with credit card debts or overdrafts. It is vital for you to have a stable and permanent source of income to ensure immediate payment of debts as settled during negotiation.

You have to commit to meeting the payment within the settled date and time. Only after that can you enjoy the perks of low-interest rates.

Seek this option if you can make adjustments in spending. Besides, you have to make sure you will not borrow money while you are working on this plan. It is a feasible alternative if you are in condition to execute the plan while handling other financial priorities.

You possess efficient budgeting skills. It can ensure successful payment of debts and management of other expenses.

Debt consolidation

It is a process of combining past debts into a single segment. It ensures you don’t have to attend to different debts at one time. So, you will have to meet a single interest rate.

There are ways to can combine and pay off debts. You can choose any of the methods as per convenience and budget. Don’t go overboard and opt for an alternative that is beyond your affordability.

With this option, there is a possibility for you to handle debts by paying low monthly payments or at lower interest rates. It can relieve the stress caused because of the different types of debts you owe.

Pros

Repayment becomes easy and manageable

Relief from the burden of high-interest rates

Cons

Continue paying off till an extended duration

The overall interest payment is more than you actually expected

When is this alternative viable for you?

You can turn to this option of debt consolidation based on your circumstance. It enables you to get a complete overview of the current status of your finances. It tells you about the interest amount that you are covering.

You can pick this alternative if you are not in a position to handle many debts together. In short, you want a single way to deal with the ongoing debt problem. This option would demand to budget so that you can track and curtail your expenses to make space for additional money.

If interest rates to consolidate debts are lower than what you are paying as a whole till now, it is indeed a good option for you.

How to decide between the two alternatives?

Your circumstances and financial capacity can choose the best way for you. If you are confused between these two choices, the ideal thing is to conduct a comparative study for complete clarity.

You must ponder upon different points that are related to your financial well-being before taking the final plunge.

The bottom line

When you get stuck with debts, choosing the best way becomes difficult. It could be because you don’t possess in-depth knowledge of how debt management and debt consolidation can come in handy for your purpose.

Let your financial need and ability decide if getting loans like provident would be helpful or not. But one thing you must not forget while dealing with these loans is that you need to be living in Ireland to avail of this loan facility.

Before you reach any decision, consider weighing both options. Take every financial aspect into account, like credit scores that could feel the impact of your decision.

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