Combine multiple debts.

Consumers can save money and time by transferring debts to a lender with lower interest for a single payment.

If you’ve found yourself in a significant amount of debt, clearing this financial hurdle is an important priority. Debt consolidation and debt settlement are both options for resolving debt, but that’s largely where the comparison ends. These methods employ very different tactics, and have much different ramifications for your credit score and the timeline before you are free of debt.

What Is Debt Consolidation?

Debt consolidation is a debt management strategy in which you combine multiple debts into a single payment. The basic idea is that consumers can save money and time by transferring debt to a lender with lower interest, and that it’s simpler to deal with one lender than balance multiple debts to different lenders. So how does debt consolidation work? Here’s an example:

If you owe one creditor $50 per month at 18.99% interest, another creditor $50 per month at 9% interest, and a third $50 per month at 24.99% interest, you could take out a consolidation loan and settle all three debts. Then, you’d owe the new lender $150 per month under a single interest rate. If you’re strategic about consolidation methods, you might even be able to get a decreased interest rate. Average debt consolidation loan interest rates are around 18.56%, comparable to some credit cards, but a strong credit score and short loan term could help your chances of getting a rate as low as 4.52% to 7.37%.

What’s the smartest way to consolidate debt?

The two main ways to do this are to use a 0% interest, balance transfer credit card, or to take out a debt consolidation loan. The credit card option is often only available for people with a credit score around 680 or higher, and the 0% interest rate is usually in effect for a 12-18 month promotional period. It may also incur a one-time balance transfer fee. Typical debt consolidation loans typically come with interest rates that can easily be as high as a credit card, but they may be more widely available for people with lower credit scores.

The main advantage of debt consolidation is that it’s easier to pay monthly debts to a single lender, and you may be able to secure a lower overall interest rate on your debt. Important drawbacks are that if you extend the repayment period to lower monthly payments, you could pay more in total by adding interest. Debt consolidation loans may also use assets like your home or car as collateral.

What Is Debt Settlement?

Debt settlement is a process where you offer the lender a lump payment up front — often less than the total amount you owe — in order to remove your debt. It seems strange to imagine that a lender would happily agree to accept less than what you owe, until you take into account that 10% of Americans expect to take 10 years to pay back credit card debt, and others don’t ever expect to repay the balance. Some lenders would rather get what they can immediately than hold out hope of receiving the full balance in a decade or more.

That said, lenders don’t have to work with you on a settlement. It can take months or even years of negotiation to convince them to work out an arrangement. It’s also extremely important to get all the details in writing, including an official statement that the debt is considered satisfied. The last thing you want is to scrape together a lump sum settlement and then have the lender come after you for the remainder anyway.

The main advantage to debt settlement is that it gets rid of a debt altogether. The downside is that the process can be lengthy, complicated, and stressful. Debt settlement can also negatively impact your credit score. Settlement is a better option than bankruptcy in most cases, but it’s better to stay current on debt payments than “save” money with a settlement.

Which is Better Debt Consolidation or Debt Settlement?

The right debt relief strategy for you depends on your circumstances. It’s always important to research your options carefully before entering into a new financial agreement.

That said, debt consolidation has some important advantages over debt settlement, especially in terms of your credit. Debt consolidation can lead to a dip in credit because loans or a balance transfer credit card application require a hard inquiry on your credit. This should only be a temporary dip of a small number of points. Depending on how well you commit to paying your debt consolidation loan payments on time, you could see your score improve or worsen. You’ll have a longer period of time before you’re debt free, but if you play your cards right, you can be on good financial footing by the time you send your last payment.

Debt settlement, in comparison, is only available once your account is delinquent. A creditor isn’t going to be open to lowering the amount they accept if they’re receiving regular payments. Missed payments will hurt your credit. Then once you’ve missed enough payments to open negotiation, you’ll miss more during the lengthy process of agreeing on a settlement. The settlement itself will also reflect negatively on your credit report, showing up as a zero balance, but with a note that the account was settled for less than the amount owed. All this remains on your credit report for seven years, which can seriously impact your ability to apply for business loans, a new mortgage, or other major financial agreements.

Families who are already delinquent on loans and struggling to get their head above water may turn to debt settlement as a last measure. But if your debts are current or even only one or two missed payments behind, you may find that debt consolidation is much better for your financial health in the long run. You may be wondering, what are alternatives to debt consolidation?

How RealtyGO Can Help

At RealtyGO, we’ve seen that a house can be much more than a roof and four walls. It’s also a major source of many family’s wealth, often your most valuable asset. We believe using your home equity wisely can be part of a healthy approach to family finance – which is why our mission is to help homeowners unlock the wealth in their homes.

Getting out of debt can feel like an almost insurmountable hurdle, especially because some options like debt consolidation replace debt with…well, other debt. Some homeowners are relieved to hear about RealtyGO’s Home Value Investment which helps homeowners access funds they need without adding debt to their official financial profile. RealtyGO’s Home Value Investment is not a loan. There’s no interest and no monthly payments to factor into your budget. You can use part of the equity you’ve grown in your home to pay off debt in a way that fits best for your long-term financial health. That may help explain why, of all the funding RealtyGO has provided to homeowners since 2016, 33% of those funds have gone directly to pay off debt. Find out if RealtyGO is available in your area and how much you qualify for, without impacting your credit score.

Tackling debt can be an important financial and personal goal. You feel better when you’re not worrying about how to pay multiple creditors. The method you choose to pay off debt can have a big impact on your financial life afterward. Research your options carefully, and choose the debt relief method that’s most sustainable and healthy for your family.

Roughly 28 million people in the United States do not have health insurance. A hospital stay can cost nearly $4,000 per day, and life-saving surgeries or cancer treatments can come with six-figure price tags. Even people with insurance can find themselves on the hook for bills for many thousands of dollars.

Regardless how much money you have saved, an unexpected medical expense can leave you in trouble. If you get behind on other bills while dealing with a medical expense for you or a loved one, you can end up in a cycle of debt that’s hard to escape. So how can you get help with medical bills to avoid going deep into the red?

Get the Bill as Low as Possible

There isn’t a single, overarching structure in place to guide healthcare and hospital billing. That means hospitals may have to work on their own to balance their need to stay financially afloat with the need to comply with complex government regulations and billing requirements, and serve people in their community.

Medical providers may be willing to work with you to figure out a payment plan. Your first step is doing what you can to lower your bill.

Before going to the hospital
In an emergency, you may not have time to research options and discuss a detailed plan for your care. But if you have time to plan out your medical care, keep these ideas in mind:

# Choose in-network providers: Talk with your doctor about everyone who will be on your healthcare team so you don’t overlook a care provider (e.g., the anesthesiologist for someone who is giving birth).

# Ask for an estimate: Before you schedule an appointment or procedure, you can request an estimated cost for the services. You can also confirm they accept your insurance.

# Compare providers: Different hospitals or clinics may price services differently. Comparing options may help you find the most affordable care. Of course, quality of care comes first — consider success rates for your procedure and your own comfort level with the provider, as well as any financial considerations.

# Ask about your care plan: Many doctors let their office deal with charges and focus on treatment first (understandably). They may not realize you’re struggling to afford a certain test. You can ask if there are other tests or treatments available that achieve similar results at a lower cost.

After leaving the hospital
Once you have a bill in hand, it may feel like it’s too late to do anything about it. Not true: In many cases, you may be able to reduce the amount you owe even after you’ve received your care and been billed. Here’s what to do:

# Request an itemized bill: Hospitals are required to provide you with an itemized bill upon request. Often, requesting is enough to knock some money off the total. Why? An administrator preparing the bill may notice and correct errors along the way or cut miscellaneous charges.

# Review the bill for errors: As many as 80% of hospital bills contain errors, according to some reports. You can contest any charge you feel is inaccurate for the care you received.

# Work with a patient advocate: A patient advocate can offer medical bill assistance to decipher jargon and help catch possible errors you might overlook.

# Ask about discounts and payment plan options: The billing office can talk with you about any solutions to make smaller payments over time, or even discount charges if possible.

These tips may help decrease your bill, but they likely won’t remove it altogether. The next step, once you have your reduced medical bill balance, is figuring out where to find additional help with hospital bills.

Finding Financial Assistance for Medical Bills

When unexpected bills hit, many people search for loans to pay off the debt. The problem is that this strategy still leaves you in a tough position if you are unable to pay back the loan soon. What’s more, some loans use your home as collateral, meaning too many missed payments could lead to foreclosure.

What happens if my medical bill goes to collections?
Ignoring a medical bill won’t make it go away. A medical provider can send the debt to collections. Legally, debt collectors are not allowed to harass you, lie, or conduct unfair practices. In reality, debt collectors are notorious for breaking rules and using underhanded tactics to get payments.

The three major credit bureaus wait 180 days before including medical debt on your credit report. Some credit score calculation models will ignore paid collection accounts, as well. If you’re able to pay debt or agree to a payment plan to keep your medical debt out of collections, you may be able to avoid hurting your credit score. However, if a medical debt goes on too long unpaid, it can impact your credit and remain on your report for 7 years.

Get help paying medical bills
Instead of rushing to replace medical debt with another loan, take time to understand your options and reach out for financial assistance.

# Medicaid and CHIP help pay medical costs for children in families who can’t afford health insurance.
# Social Security Administration (SSA) offices and Medicare may be able to help people over 65, people with disabilities, and people with end-stage kidney disease.
# Cancer patients and others with chronic illnesses may have trouble making ends meet financially. A support organization related to your condition (e.g., the American Cancer Society) may offer resources for patients and families to find financial assistance for medical bills and other critical expenses.
# State government programs: California, New Jersey, New York, Rhode Island, and Washington state offer paid leave benefits for caregivers.

For general guidance on debt, you can speak with a nonprofit credit counselor to see if there are ways to consolidate or lower your total debts to a more manageable balance.

Are loans a good way to pay off medical debt?
If you decide a loan is your best option to pay off medical debt, remember that not all funding is equal. Choosing a reputable financier and repayment terms that you’re confident you can meet is essential.

Repayment terms can feel like the hardest challenge to overcome. Medical expenses are typically interest free, so paying them off with an interest-bearing loan (like a credit card) can feel like a step backward. If making monthly payments to the hospital strains your finances, it can also feel like making monthly payments to another lender will be no better.

For some families, a Home Value Investment with RealtyGO could be a viable solution to get help with medical bills. The RealtyGO investment gives homeowners a lump sum of money immediately. There are no monthly payments or interest. Instead, the eventual repayment is based on how your home value has changed over time. For homeowners who already planned to move in the coming years (e.g., to downsize), this can be an easy way to use home equity toward a current need, instead of waiting for years to access that value.

A medical emergency can affect anyone, and no one should have to face the prospect of ruinous debt to access needed medical care. If you’re struggling to find help paying medical bills, talk to an experienced financial professional about where to access financial aid resources to pay your debt and protect your credit.

Many parents and students believe hefty tuition fees should purchase a particular college experience — such as in-person classes, mentorship, and access to labs or other resources. When classes moved online in the spring due to COVID-19, some students sued to try to recoup the value they felt they lost.

The sticky truth is that many college expenses are a financial casualty of the coronavirus pandemic. It’s often difficult to redistribute money you’d earmarked for education or get much money back once you’ve paid for your student.

Why Won’t the University Refund My Tuition?

There are multiple reasons that a student may end up withdrawing from a semester of college, such as struggling with virtual learning, or having to leave campus after breaking social distancing rules.

Unfortunately, getting a refund on tuition is difficult. The challenge is that colleges can’t generally swap out students mid-semester, and a student can’t “return” information they learned in the first weeks or month of classes. If colleges feel that they can still offer equivalent coursework online, they’re also unlikely to agree to a refund. You may have an easier time getting money back for room and board or other fees, although some colleges have announced they will not offer prorated refunds if the campus must close in the fall 2020 semester. Some schools may refund partial tuition on a sliding scale, but unless you withdraw in the first week or two of the semester, you can expect to be on the hook for the majority of the costs.

Even contracting COVID-19 is unlikely to result in a refund. Only 6% of colleges and universities offer 100% tuition refunds for medical withdrawals. If students are dismissed for a disciplinary reason, such as breaking social distancing rules, it’s extremely difficult to make a case for a refund.

How to Mitigate Tuition Losses
The 2020-2021 academic year may be unlike any other for colleges and universities. While most colleges seem firmly against tuition refunds, a lot is up in the air right now as universities and students draw their own lines in the sand. In other words, you may have more chances to reclaim lost college costs, depending how hard you’re willing to fight.

Students at several colleges, including Rutgers and Texas A&M, have banded together to demand reduced tuition, reflecting the loss of access to campus services they say their payments would normally cover. A student petition at Brown University resulted in the university reducing or cancelling several fees. Connecting with as many other students as possible (or even asking alumni to add their voices) may be your best chance at convincing your university to consider lowering or waiving certain costs.

Another possible option to consider is tuition insurance. A third-party provider may insure your student if they need to withdraw from classes because they (or you) become ill, including COVID-19 illness. Tuition insurance may not cover disciplinary removal, such as the students dismissed from Northeastern University for breaking social distancing requirements. Even if you feel that social distancing rules are not feasible for students to follow, if they agree to the rules in their code of conduct, you may be out of luck as far as getting tuition back.

Finally, have a backup plan in place. When campuses closed in the spring 2020 semester, many students had little time to pack, make travel arrangements, and finalize a place to stay. Some students didn’t have a safe living option besides campus housing. If your student is on campus, do you have a way to get them home on short notice that is safe and affordable? Do you know how you’d deal with collecting their possessions? If you are fortunate to have extra living space, such as a guest home, you might even be in a position to help a student without another place to go.

Can I Still Use 529 Funds for Virtual College?
The pandemic may have changed many plans, or even prompted young adults to reconsider their best option. Fortunately, you have quite a few options for using 529 funds to cover your child’s next steps.

Even if your child decides against pursuing a 4-year degree, 529 funds can go toward many vocational schools, technical schools, or apprenticeships, as well.

You can use 529 funds toward necessary equipment for your student to participate in classes. Computers, software, and even Internet access may be qualified expenses. Check with a qualified financial professional about expenses you’re not sure of, such as a noise-canceling headset, or how to offset a student’s share of Internet access on a shared family plan.

If you need to take a non-qualified withdrawal from your student’s 529 plan, you’ll pay taxes on investment gains, along with a 10% penalty in most cases.

Unfortunately, you can’t dip into the 529 to cover living expenses. You can pay for a college’s room and board plan with 529 savings, but if your student is living at home, you can’t offset grocery or mortgage bills out of the 529 account. That’s one reason why it may be helpful to use 529 funds toward as many qualified expenses as possible, such as books, course fees, and computers, since you may have a higher household budget than you’d planned for.

When Will College Go Back to Normal?
There’s no saying for certain what coming months will bring, but some experts worry that COVID-19 will continue to be a major threat this winter. Illnesses can make their way through a campus any year, and it seems possible that some campuses will face hard choices again about whether to stay open or close for student and staff safety.

One possible silver lining is that the need for widespread virtual college classes may drive colleges and universities to innovate. Implementing more responsive technology to accommodate students and professors may be part of a “new normal” that expands the ways people can access a college education.

In the meantime, preparing a safe, quiet study space — and fast Internet — may be a major part of supporting your college student to get the best possible education they can right now. Whatever the future brings, planning financial and logistical support for college students in your family can play a big role in their success.