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Debt settlement and debt consolidation both offer ways of reducing your debt. Debt settlement eliminates part of your loans, while debt consolidation reduces interest rates. Even though debt consolidation has the least impact on your credit table score, there are cases where debt settlement is a better option for you.

Lower Debt
The goal of both debt settlement and debt consolidation is to make sure you are having lesser debts. Debt settlement companies negotiate with your creditors to reduce the amount of your loans, base on that you will be charged a certain fee, and the debt reduction will remain on your credit score for around seven years.

Debt settlement can reduce your debt 10% to 50%, it really have to depend. To get the most out of the program, pay off the rest of your debt as soon as possible. Also close accounts that you don’t plan on using to raise your credit score.

Debt consolidation pays off your high interest debts with a low interest loan. Home equity loans provide the lowest rates, but personal loans can also be used. With rates lower on your debt, you can pay off the principal sooner by making the same monthly payments.

Credit Score Implication
Reducing your loans through debt settlement is a serious mark to creditors. You credit score will drop, making you ineligible for conventional loans. But you can apply for sub prime credit after a year. After a couple of years of good credit habits, you can then apply for lower rate conventional loans.

Taking out a loan to consolidate your debt will have a slight impact on your credit. Since your debt isn’t actually increasing, you will only be hit for opening another account. By closing your paid off accounts, you can partially offset the penalty. In a short period though, you will be in good credit standing if you follow best practices with your credit.

Financial Choices
No one financial choice fits everyone’s needs. While debt consolidation has the least affect on your credit report, additional loans may be too expensive. In some cases, debt settlement can help to avoid bankruptcy. So Before deciding on any of these options, look at what companies are offering in terms of rates and fees. And if you need additional advice, talk to a credit counselor who can take a look at your finances and offer suggestions.