Debt consolidation is when you combine several loans into a single loan to get a better interest rate and simpler payments. Debt settlement is where you call your creditors and try to get them to reduce the amount you owe.
Obviously debt settlement sounds good because it reduces the amount you have to pay. However, if you have made a commitment (a promise) to repay someone, you should do your best to repay them. However in some cases if you have fallen way behind and your original debt has aquired a high percentage of fees from late payments, etc. settlement might be an options. Credit companies may be more interested in getting what you originally owed or even a portion of what you originally owed rather than forcing you into bankruptcy. If you go bankrupt they may get nothing, or they may get less than what you could give them if you worked out a debt settlement agreement.
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