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Debt management refers to the process of better managing your debts. It means that the borrower agrees to repay outstanding debts at the rate of interest and tenure as per the original debt contract.

Debt settlement, on the other hand, refers to a set-up that allows a borrower to pay a lump sum amount which is normally lesser than the original loan amount to be paid.

Now, that we’ve seen the broad definitions let’s take a closer look at both. 

Debt Management vs. Debt Settlement?

Key features of debt management vs. debt settlement are

Debt ManagementDebt Settlement

Features

It’s the process of better managing one’s debts to ensure timely payment. It may involve approaching the lender for reducing interest rate and fees on loan to lower EMIs but still total loan has to be paid. Such an option is undertaken for safeguarding both interest of lender and debtor.

The borrower gets to pay a lumpsum amount which is typically less than the original loan amount.

Payment

Full loan to be repaid

Loan repaid is less than the original loan amount

Credit Score

Not impacted 

Adversely impacted

Benefit

Improvement in money management skills and draw up a budget to repay the loan at the earliest.

Borrower can repay lesser loan amount.

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