How To Consolidate My Debt

“Can someone please show me how to consolidate my debt?” Absolutely! This is probably the number 1 question people that ask about when they are drowning and desperate to find some fast relief. It’s usually the last ditch effort prior to bankruptcy. So let’s take a look, shall we?


Debt “consolidation” works in a couple of different ways. There are debt consolidation loans. These are personal loans where the creditor will loan out a large sum of money to pay off several smaller debts. Thus, “consolidating” it into one, smaller monthly payment. The payment is usually less than the sum of all the monthly payments that are included in the payoff. Interest rates and terms can differ and it’s usually based on your credit score. It’s important to look closely and understand all of the terms and conditions before jumping into this.

There are also debt counseling/settlement services. Sometimes these are referred to as a “loan” but they don’t quite work the same way. Basically, you get a hold of a credit counseling company. They do a full assessment of your entire financial situation. Then they look for ways that they can reduce your total amount owed by negotiating with the creditors. You still make one monthly payment for all of the debts that they include in their service, but you pay the counseling center instead of the creditors themselves and they pay the creditors for you. Then, they work out a settlement with the creditors to reduce total amount due, interest rates, etc. to help ease the burden on your monthly budget and total amount owed.


As I say daily, everyone’s situation is different. I’m certainly not anti-consolidation by any means. But it needs to make sense for your situation and you need to follow the other advice I have given you as well.


  • One fixed monthly payment.
  • Usually lower interest rates.
  • They can sometimes get your debts “settled” at a fraction of the cost.
  • They normally set a definitive timeframe that your debt will be paid in full.


  • Negative impact on your credit score.
  • There are fees, especially with the credit counseling options.
  • Lots of scams out there so it’s hard to find legitimate ones if you aren’t careful.
  • Lack of discipline can lead to additional credit cards and loans putting you deeper in debt.
  • Not all creditors/lenders will participate in the settlement offers.


1. IS THERE AN EARLY PAYOFF OPTION/PENALTY? This is always the first thing I look for in any situation if I’m looking for a loan. This typically doesn’t apply if you are looking at a settlement option. It’s more applicable if you are looking at the actual consolidation loan type of option.

I have a personal friend who went to refinance his truck and found out there was a penalty of several thousands of dollars if he paid it off early. He was angry and devastated. They usually don’t bring it up, so make sure you ask.

Remember, you are also focusing on maximizing your income as well so you are going to be in a much better situation a few months down the road and could throw some extra dollars that way to get it knocked out in a hurry! But it could also go to pay down debts that aren’t included in the consolidation. So, carefully plan your decision.

2. WHAT ARE THE QUALIFICATIONS TO ENROLL? There are usually some minimum qualifications and they are looking for people that are in true financial hardship. The fact of the matter is if you are only a couple thousand dollars in debt you don’t need to consider debt consolidation/settlement anyway. But knowing what their qualifications are can help you quickly determine which program is right for your situation.

3. DO THEY OFFER A FREE CONSULTATION?  Most of these companies will do a free consultation. Especially when they know you are already hurting and looking for relief. However, there are some out there that don’t. Be very careful and I would advise you to steer clear of these.

4. WHAT ARE THE FEES?  Make sure they are up front with you about the fees! Some will charge a percentage of debt enrolled. Some will charge a flat monthly fee while you are using their service. You need to know this information so you can make an informed decision as to what will ultimately benefit you in the long run. If the total cost in fees is greater than the total they are saving you, it’s not a good deal.

5. WHAT DO THEY OFFER?  Before signing with any of these companies you need to find out what all they offer and how they work. Are they offering a loan? Or are they offering credit counseling/settlement options? Know how they work and what works best for your situation.

6. WHAT IS THE INTEREST RATE?  Find out what your interest rate is going to be. This will be determined by your credit score. Many of them will be able to tell you how much your total interest paid out will be versus how much it will cost paying them off yourself. Just remember, the more you are maximizing your income the less interest you will owe over the course of your battle.

7. WHAT IS THE APPROXIMATE PAYOFF TIME IF I DON’T PAY IT OFF EARLY?  This is usually brought up rather early in the conversation, especially because it’s part of what makes them shine. Many will say something like, “I can get all of these debts completely paid off in 24 months.  You will be debt free in 2 years!  Doesn’t that sound great?”  If they DON’T have a set time frame, RUN.

8. HOW SUCCESSFUL ARE THEY WHEN NEGOTIATING WITH CREDITORS?  This is specifically for the credit counseling/settlement services. Ask them how successful they are in negotiating settlements with creditors. Have them give you some examples. What’s the average reduction they obtain? Don’t be afraid to be assertive. If they are giving you the runaround move on to a different company. They are after YOUR business. You are working a plan either way so don’t allow them to treat you like the victim!


Be very careful of scams. There are so many of them out there. Here are some things to look for while researching and talking with them.

  • How long have they been in business?
  • Are they asking for money up front?
  • Do they offer a free consultation?
  • What is their rating with the Better Business Bureau (BBB)?
  • Have they received good reviews from other users?

Generally, after you’ve done some research and can answer all or some of these questions you know whether they are legitimate or not. Go with your gut feeling. If it seems to good to be true, it is.


You will find arguments on both sides of the fence on debt consolidation.  I can tell you from personal experience that at one point my wife and I went through a credit counseling service. The service was great. They were able to knock out a few debts and save us a lot of money on interest. The problem was we didn’t do our part. We continued to acquire more debt through new accounts and ended up in a worse situation than before. Regardless if you use this option in your battle you NEED to cut up the cards and stop borrowing money!

Personally, I think it’s a tool that can be used in addition to the other tips and strategies we have talked about and can help save you a bunch of money. If you have several higher balance credit cards and loans charging you 20-30% interest it very well might be wise to look into and see if it benefits your situation.

However, if you are only looking for the “easy” way out it will lead you to failure.  Because you WILL fall into the same trap that my wife and I set for ourselves.  You need to be disciplined and you need to follow through on the other parts of your plan.


I am checking into many companies right now trying to get answers to my list of questions. Some of them are very slow to get back to me. Some seem to be dodging me altogether.  For now, I recommend National Debt Relief.

As more companies get back with me I will be reviewing additional options as well.

— > Click here to read my National Debt Relief review. < —

What are your thoughts on debt consolidation?  Have you looked into it or tried it?  We would love to hear your stories below.

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