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There are many different ways to get out of debt, and several options to choose from. The most popular two, however, are debt consolidation and debt negotiation. There are subtle differences between the two, and it helps to explore them as you search for the best way for you to get out of debt.

Debt consolidation

If you use debt consolidation to get out of debt, you essentially put all your debts together and then pay them off, using one payment and one interest rate. One of the most common ways to do this is through a home equity loan, or a second home mortgage. You use the money from the refinance mortgage to pay off all of your debts. Then you have only one payment and (usually) one lower interest rate. And the home mortgage interest paid is usually tax-deductible in some way.

You do not always have to use a home mortgage to do your debt consolidation, however. It is possible for you to take out an unsecured debt consolidation loan to help pay off your smaller debts. And, you can even consolidate your debt through a company in such a way that you are not taking out a loan at all. Rather, you merely give in your account information to a certified debt consolidation company, and make your single payment to the company. The company then makes all of your smaller payments.

Debt negotiation

Debt negotiation is a different tack. It seems similar to debt consolidation, but it really is quite different. You contact a company and give in your debt information. Then you stop paying your creditors and make payments to the company. The company puts your money into an account to use for later. The company acts as your representative to your creditors, and begins working with them to settle your debt. When an agreement has been reached, the money from the account is used to pay the settlement. The negotiation company moves to the next creditor, engaging in the same negotiations.

It is important to note that when you enter either debt consolidation or debt negotiation that your credit score will take a hit. With debt consolidation, however, it is a smaller hit. With debt negotiation, your credit report will show that you have stopped paying your creditors (which you have).

These are not the only options to help you get out of debt. However, they are among the most popular, as they require the least amount of work from you.