The reasons for a financial debacle such as bad debt could be any number of reasons beginning with financial indiscipline, wrong financial planning or the worst possible reason being a financial victim. But whatever the reasons for bad debt, the consequences of it will have to be borne by you. Financial experts believe that filing for bankruptcy is like bolting the stable doors after the horses have all escaped.

Filing for bankruptcy could be a well timed financial strategy only for a professional and it would leave a bad taste in the mouth for the majority who view bankruptcy as a social stigma. The stigma associated with it is for the failure of an individual in bearing his financial commitments to others. Therefore a person would think twice before filing for bankruptcy and instead would explore all the possibilities available for him to make his commitments to others.

Financial experts would offer several types of packages for the individual to shape up his commitments.If the debt is due to credit cards, then adopting snowflakes and snowball strategies will pay off the debt.Despite adopting these strategies if the debt continue then one will have to get talking with the creditors. This could happen at two stages. Let’s discuss debt negotiation vs. debt settlement as effective ways of getting out of bad debt.

 What happens with debt negotiation?

You or a representative on your behalf will negotiate for reduction in the overall rates of interests for the debt repayment.Creditors to cut their losses and to clear the decks of bad debts would agree to waive off certain amounts from the outstanding amount due to them. The better the negotiation the higher will be the amount waived. There are experienced and professional debt negotiators who can safeguard your interests and do a great job in getting you almost forty to sixty percent reduction in the rates of interest and thus reducing the overall amount you will have to pay back the creditor.

Debt negotiation can be used only in the case of unsecured debt where there are no tangible assets for the creditors to take possession of to make up the full amount of debt owed. In the argument of debt negotiation vs. debt settlement this is a stark contrasting point.

How does debt settlement work?

The debt settlement procedure can be adopted mainly in the case of secured loans like housing, mortgages etc.The whole aim of different strategies to nullify debt is to lower the overall amount that needs to be paid to the different creditors. Therefore, during debt settlement a third party on your behalf will negotiate hard with the creditors and will aim to lower the outstanding amounts rather than lowering the rates of interest.

While discussing debt negotiation vs. debt settlement herein lays the difference between the two debt managing techniques. Both are two sides of the same company. Debt negotiations will have to occur for debt settlement to happen. Debt settlement is not possible unless there are negotiations on various criteria by both parties either directly between the two parties or through their respective representatives. The conclusion of debt negotiation vs. debt settlement is that they go hand in hand.