Debt consolidation can be one of two things.
It can be a loan that consolidates all your debt into a single loan with one monthly payment. This loan is secured with collateral, usually your home.
The second type of debt consolidation is a reorganization of your unsecured debt through a debt counseling organization. This type of debt consolidation is not a loan, but it does offer you the convenience of making one monthly payment to repay your unsecured loans.
But by now you are probably wondering if there is such a thing as free debt consolidation and if there is where you can find it. Well, the answer is yes. Or rather, it can be found for very close to free. Be sure to choose a certified, non-profit consumer credit counseling service, sometimes referred to as CCCS. There are many debt counseling services out there today, but not all of them are non-profit.
The non-profit credit counseling agencies will offer either free credit counseling or credit counseling with a one-time set-up fee (usually less than $50). Some of these agencies may charge a small monthly fee (usually $30-$40). This really is a small price to pay considering your interest rate and fees will be reduced by much more than that.
The credit counselors employed by credit counseling companies work to consolidate your unsecured debt into one low monthly payment with a substantially reduced interest rate. They will negotiate with your creditors to lower your monthly payments and lower or possibly eliminate the interest on these payments. These debt counselors can get you started down the road to debt elimination very quickly and can have you debt free in 2-4 years.
Credit consumer counseling organizations do no offer loans, which could possibly put you deeper in debt. These debt counselors will negotiate on your behalf with your creditors, creating a repayment plan that will be beneficial to you and your creditors. Your credit counselor will educate you on how to control and manage your debt.
Credit cards can have an interest rate between 18% and 26%. If you pay only minimum payments, it will take you between 30 and 40 years to pay off your credit card debt. With the use of certified credit counseling and a consumer credit counseling agency, you can quickly be on your way to debt freedom.
Debt consolidation loans, many of which are second mortgages on your home, have closing costs that are added to the amount of the loan. In many cases, this amount is less than $500 and is not an out-of-pocket expense. So, at the time you secure the loan, you will not be paying anything.
As far as the fees for debt consolidation, they are going to be quite small. In most cases, the small expenditure required for debt consolidation is worth what you are getting in return. You find yourself in a position where your debt is being reduced and you are making progress towards getting out of debt.