Irrespective of whether you are in debt because of your private expenses or business needs, the situation is never pleasant. With time, debts tend to spiral out of control because of interest rates and late penalties. If you do not act fast, you may end up paying back many times the amount that you borrowed.

But there is no reason to lose hope and file for bankruptcy. One can get rid of debts by taking the right steps. There are primarily two ways of dealing with a debt problem: Debt Consolidation and Debt Settlement. This article discusses the pros and cons of the two methods to enable you to choose the option that is right for you.

Debt Consolidation

In this method borrowers take one loan to repay all the debts that they have. Often people find this method convenient as they have to make relatively lower monthly payments. The interest rates can also be lowered if they have assets like houses to offer as collateral. However, the problem is that borrowers may not have enough assets and even if they do, these assets are generally indispensable assets. Inability to repay the loan properly may result in the loss of these assets.

Debt Settlement

In this method the borrowers negotiate with the debtors to reduce their debt burden. Although this sounds strange, creditors are willing to take this step because facts and figures tell them the borrowers who have genuine reasons for being unable to pay back loans usually take more loans to keep up with the monthly payments. This is the first step of what eventually becomes a vicious debt trap. Ultimately the borrower files for bankruptcy, and the creditor does not get the money back.

How to look for a reliable Debt Relief Company?

Individuals usually need professional assistance when it comes to debt relief because they are required to deal with professional creditors who try to twist their arms, and make the borrowers agree to harsh terms. However, many debt relief companies are set up to merely dupe borrowers into paying charges for imaginary services before decamping. Or they steal the identity of the client and use it for financial frauds. Thus, one should be very careful while choosing a debt relief company because one has to share detailed financial information with these companies. To find the right company, one should see to it that the consultants they employ are certified. One may check with the Better Business Bureau to see if the company is listed with them or not. Since the BBB have stringent requirements for certification, companies listed with them are likely to be trustworthy.