5 Steps to Select the Best Debt Consolidation Program

We’ve talked before on WSL about debt consolidation and the pros and cons associated. While there are a number of types of debt consolidation, the point of today’s article is to help you determine the best debt consolidation program for your situation.

Personally, I used a consolidation program where a company negotiated new monthly payments and interest rates with each of my creditors (on my behalf). After negotiating more reasonable terms with my creditors, I then paid the debt consolidation program a single monthly payment in which they disbursed between the 4 or 5 creditors I had at the time. While debt consolidation is not the best solution for everybody, it helped me when I was in a bind and may be an option for you – especially if you have large amounts of credit card debt or are behind on your payments.

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5 Steps to Determine the Best Debt Consolidation Program

1. Know Your Requirements

The first and most important thing is to know what you need help with. There are many types of debts and the best program depends on several things including the nature of debt and your needs. If you have high interest credit card, personal loan, or medical debt, then a debt consolidation program may be just what you need to get over any current financial issues.

2. Find a Program

There are many sources for finding the best debt consolidation program. However, the main question is not where to find it but how to find the best one. There are various sources from where you can gather information. Some of them are:

  • The Internet — the internet has all the answers these days. All you need to do is open your favorite search engine such as Google and search using the right keywords such as ‘debt settlement in America’ if you live in the US. You will be bombarded with a number of programs. You can visit the websites and read the details to know what exactly they offer.
  • Friends and Family – you may also talk to your friends or relatives about it. If they have some kind of experience with any debt consolidation company they may be able to help you.
  • Newspapers and/or magazines

While you can use these sources to gather information, make sure to check their BBB rating as that will often indicate whether or not they’re one of the best debt consolidation programs available. While I didn’t do this as a part of my research, it may behoove you to check the company’s license to make sure that it is an authentic company.

3. Contact the Company

Once you have found a program and looked through their website to understand what they offer, then either visit them in person or contact them via phone (realistically, it’s unlikely the company you find will be in your local area).

Some important questions that should be answered are:

  • How much will you be expected to pay? Is there a one-time cost or is it a monthly fee?
  • How their process works — from start to finish.
  • What information you need to provide them and how quickly you can expect for them to have agreements reached with your creditors.

When I’ve heard of or read complaints about a debt consolidation program it’s nearly ALWAYS because there were unrealistic expectations on the side of the consumer. That may be because the consolidation company promised unrealistic things. It’s important to understand that just because you ask a debt consolidation program to work on your behalf, it doesn’t GUARANTEE they can come to an agreement with your creditors.

To cut straight to the point: your creditors don’t HAVE to lower your interest rate or monthly payment because you’re now working with the best debt consolidation program around. At the end of the day, it simply depends on whether or not your creditors are willing to negotiate — sometimes the debt consolidation company can help with that, and sometimes they can’t.

4. Do More Research

After you’ve gained a clear understanding of expectations, it’s important to remember that you shouldn’t trust every word you are told by the company. While you may have already done this as a part of step two, do some more research to make sure you’re comfortable with the company before you proceed. Most importantly, search reviews and testimonials on the internet.

5. Get It Done

Once you have passed all these stages it is time to make the final call and sign on the dotted line. Make sure you read the contract clearly and understand every word. In case there is any confusion waste no time in getting it cleared so that there are no issues in the end.

The reality is that there are hundreds of programs out there. The difference between finding the best debt consolidation program and being involved in a nightmare is the process in which you follow. Do your research, read review, check the BBB ratings, understand the expectations (and what my go wrong) clearly and you’ll set yourself up to make the best decision possible.

Picture by FreeDigitalPhotos.

About the Author

By , on Feb 20, 2013
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the publisher of WorkSaveLive.com.

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  1. Jose says:

    The US FTC has a nice site with lots of information on finding a trustworthy debt consolidation program. It’s worth taking a look at. http://www.consumer.ftc.gov/articles/0150-coping-debt.

  2. Cc says:

    Some creditors view this just the same as going bankrupt! They give you an R7 rating and it stays on your profile for up to 6 years from the date you pay off and graduate the program. So you could end up having horrible credit for over 6 years. Creditors PAY these services as a way to get their money and to stop people from filing bankruptcy so they can recover their money owed. But they kill your credit. For me it helped pay down debt but I wish I had of just done it on my own. If I had of done it that way my credit wouldn’t be in the dumps. Also to add to that if the credit counselling service misses a payment it still comes back on you and kills your credit further. They expect payment from you on time, but there is no guarantee that They will have the money transferred to the creditor by the date the creditor has set. Just be aware. Do your research.

  3. I’ve also never had to use the service of debt consolidation but I think for some it’s a life saver. I believe that researching options and knowing what you can and can’t do is important. Finally just getting it done so one can move on.

  4. Michelle says:

    I have never consolidated a loan, but I have had several people tell me that it worked out best for them!

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