Both debt settlement and debt consolidation can reduce and eliminate

your debt. But each will have different consequences on your credit score

and future financial options. Before choosing either option, educate

yourself on the pros and cons of each.The Benefits Of Debt SettlementDebt settlement means that part of your debt is immediately wiped out

by your creditor. You will find instant financial relief in your monthly

budget. And the rest of your debt payments are much more manageable.You will also find that you can start rebuilding your credit from this

point on. Instead of juggling late payments, high debt loads, and other

factors, you can focus on managing your credit better.The Downside Of Debt SettlementThere are a few downside to debt settlement. The biggest one is the

immediate affect on your credit score. Debt settlement is seen much like a

foreclosure; your score will be 500 or lower. And while you can improve

your score, for the next two years you will have to work with sub prime

lenders.You will also have to deal with the tax implication of a write off. The

IRS sees debt settlement like receiving a cash gift or income.

Depending on where you live, you may also have to pay additional state taxes.The Benefits Of Debt ConsolidationDebt consolidation can also help you get out of debt. With

consolidation, a company negotiates lower rates with your creditors. You make one

monthly payment to the debt consolidation company, and they handle

paying all your accounts.They also deal with any paperwork hassles, canceling fees, and closing

accounts. Usually, you can be out of short term debt in five years or

less.The Downside Of Debt ConsolidationDebt consolidation will have less of an impact on your credit score.

Most lenders will temporarily put a hold on extending you more credit

until they see you are making regular payments. You need to still monitor

your accounts to be sure the debt consolidation company is making on

time payments.Picking The Right OneThere is no perfect solution for getting out of debt. Debt settlement

can help you see an instant improvement in your finances, but at the

cost of your credit score. Debt consolidation simplifies the process with

minimum affect on your credit, however it does take time.