Debt is one of the most common things that are found to be a part of everybody’s life. At some point in our lives due to various compulsions we need to take loans from friends, relatives and sometimes from creditors. While friends and relatives can be handled it becomes a problem to handle the creditors. Debt management is a fast growing problem in today’s world. It becomes a constant tension to pay back the loan. This is a fast emerging problem in the west where credit is as much a part of life as is income.

Debt settlement is a term that is used to describe the process where both the parties will sit together and will reach a figure to which both the parties will accept as the full and final payment. The creditors will in most cases settle down for something less than the original amount. This negotiation is usually carried out by the debt settlement companies. These companies specialize in reducing the amount to be paid and also spread the payment over a period of time thus making the burden lighter for the debtor. This system is soon becoming a rage in the U.K and the U.S.

Debt settlement and debt management are two terms which make their rounds in the industry today. There is a difference between the two. Debt management or debt consolidation is where the consumer makes monthly payments to the debt consolidator who then keeps a percentage of the payment and hands the rest of it to the creditor. Once that amount is paid it is considered that the debt has been cleared. Here there are monthly payments that take place. In the case of Debt settlement the consumer will pay his creditor every month out of which the debt settlement company will take its fees. However the main difference between the two is that there are no monthly payments of fees to the debt settlement company. In U.K the customers are preferring debt settlement to debt management.

The management companies usually ask their customers to refrain from paying their money directly to their creditors instead advises them to make all their payments through them. In this way they try to blackmail the creditors to settle down for much less than what they had originally given. The company simply holds on to the money that they get from the customer without passing it on to the creditors. These methods usually do not work as the creditors instead of settling for less simply file lawsuits against the debtors. This way the debtors get entangled in legal cases thereby ending up spending much more money than they owed their creditors.

Moreover as long as the debtor pays the required amount of money monthly there is no problem but the problem arises if he does not or the money doesn’t reach the creditors. The balance and the interest continue to build up making it difficult to pay back. Thus the debt settlement is an easy and popular method of letting go of your debts. A simple and yet effective method by which you as well as your creditors are happy.