Counseling Debt Reduction

This is a very bad idea. For starters these companies don’t do this for free, second, are you going to 100% sure that ALL your payments will go to the credit card companies and not in there pockets?
You mentioned you don’t have money to pay all of them, so how are you going to pay if you consolidate?
The best thing to do is if you have a full time job, get a part time job and use that money to pay off your debt. Doing this will allow you to pick which credit cards you want to pay off first and you know that all your money is going to that company. Its also free this way.

This is a good question because the two things (debt consolidation and credit counseling) are vastly different.

A debt consolidation loan is just that, a loan from a lender to pay off bills. Often the bank will make you show proof of the bills and then cancel your cards. However, if the accounts are in collections banks may shy away from lending you the money.

A good solution to this would be Prosper. Prosper is an online community of people that lend money to people. When you open an account on Prosper they run your credit and classify you (A, B, C grade) and then you do a little bio of yourself and what you need the money for. Various people will “bid” on how much they will loan you and when the entire amount you need has been reached Prosper will fund the loan and deposit it into your account.

Payments are set up on a direct withdrawal from your account over a 3 year period. It’s really a great system!

Credit counseling can be good too. Credit counselors will contact all the lenders and arrange to have your accounts frozen and an interest rate fixed. Then they set you up on a repayment plan (usually 3 years) and you make one payment to them and they disburse the funds.

The credit counselors will charge a small fee (usually about $25 a month) for paperwork. Which isn’t so bad.

Posible problem – If your accounts are in collections with an outside party – in other words the debt has been sold to a collection agency – this probably won’t work for you as counselors work directly with the credit card companies, not collection agencies.

If you like you can come onto my site here at: and read more about debt consolidation and credit counseling. Many of my pages have an “online assessment” you can take to see which solution works best for you.

I have referrals on the articles to various credit counselors or to the assessment page. Once an organization is recommended to you you can usually call them directly to speak with someone.

All I ask is that you remember my website and tell them I referred you. I get $3 per referral.

You are on the path to recovery. It’s not easy, but at the end when you are debt free it is so liberating!

Good luck to you!