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Debt Relief (Debt Settlement) allows you to negotiate with the lender to close the loan for a lower total outstanding amount. When you realize that you are unable to repay your loans, you can strike a deal with the lender to repay less than what is owed so that you can pay off the loan and come out of it.

Debt Consolidation is a process where you combine multiple loans into a single loan. This process allows you to consolidate all your loans into one single loan with a single interest scheme.

What Is The Difference Between Debt Relief And Debt Consolidation?

Debt Relief

Debt Consolidation

Negotiate for a lower total outstanding and repay it in a pre-agreed timeframe

Combine all your loans into one single loan with a lower rate of interest and attractive repayment tenure

Late payments and non-payment records may hurt your credit score

Helps improving your credit utilization ratio and thus your credit score

Nil charges when you initiate it on your own and negotiate with the lender

Various charges and fees included similar to a new loan

You can settle debts for less than what you actually owe and escape collection proceedings, such as creditor lawsuits.

Depending on the length of the restructured loan term, you could end up paying more in total interest over time than what you originally owed

Which should I choose? 

Debt relief/settlement works best with credit card/loan outstanding. When you have a huge outstanding credit balance and are mired with interests, you should talk to your credit card company and go for debt relief so that you can pay off the loan and close it down.

You could opt for debt consolidation when you have multiple loan types and you want to consolidate them all into one. For example, if you have a personal loan, car loan and education loan and want to consolidate them into one, debt consolidation works best for you.

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