Do you have a lot of debt and seem to be stuck in a world of late and over the limit fees with no end in sight? One option that you may be considering is debt consolidation, thanks to the hundreds of debt consolidation advertisements played on radio and television. This is certainly a viable option but before you call the number attached to the next catchy jingle you hear, you should read on, and find out a little bit more about what debt consolidation agencies do and whether or not they are something that will work for your own unique situation.

First of all, let’s explore exactly what debt consolidation is. Well, the purpose of a companies that do debt consolidation consolidate debt. Simple right. Except that its not. What it involves is the company contacting creditors to lower your monthly payments and sometimes – but not usually – the interest that you are paying. Then, you pay the company one fee which is distributed to those creditors. Does it lower your payments….yes. However, there are some problems associated with this method of how to consolidate debt.

First, this is actually something that you can do yourself. Yes, you can consolidate your debts quite easily, by contacting your creditors and explaining that you, for whatever reason, are not able to make your debts and that you would like to figure out a way to get everyone paid. Explain that you are attempting to consolidate your debt and ask if they can do anything to help you lower your monthly payments so that you can get them, and everyone else paid off. You will be surprised how many will work with you, lower your interest rates or drop some fees to lower your monthly payments.

A further thing to keep in mind about companies that do debt consolidation is that your creditors may list on your credit report that you are working with a debt consolidation agency. This will stay on your credit report for quite some time and sends up an automatic red flag to future potential lenders. It says, stay away from this person, because last time they got a loan they weren’t able to pay it, and the companies lost a lot of the interest, fees and other ways that they make money because of a debt consolidation service.

Another thing that may happen is that even if your creditor agrees to consolidate your credit with the company that you are working with, they may still report the payments as late, or worse, the account as closed and the debt unsatisfied. Also, many of these companies use the first, or even second and third payments that you make to go towards their own fees and this means that if you were only a month or two behind you will end up far worse off. There are some debt consolidation programs that can help, but these are all things that you should be aware of before you begin shopping for one.