A debt consolidation loan is used to pay off the multiple outstanding debts and then it is in turn paid off in monthly payments. This provides a set interest rate that is usually lower than the interest rates of the multiple debts. One monthly payment instead of several with different due dates is more easy to manage and more convenient. Home owners can get refinance loans or home equity loans, but run the risk of foreclosure and losing their home if they default on the loan. It is also possible to get an unsecured personal loan, but it typically takes a good credit history and requires loan processing fees.

A debt management program is created by a debt consolidation firm or credit-counseling service. You make one monthly payment to the company who then divides it up among the creditors or holds it in an account until there is enough money to pay off a debt completely at one time. Some creditors will agree to decrease interest rates, accept less money if they get it in just one or two installments or waive other fees during the negotiates of repayment. While it may take a few years (typically three to five), you can pay off your debt sooner than doing it on your own and typically pay less working with a firm that is trained to negotiate with creditors on your behalf.

Whatever you think is the best path for you to become debt-free, working with a debt consolidation firm will make sure you understand all your options and help you better understand your financial situation so you can take control of it now and in the future.