I don't have first-hand experience with debt consolidation company but I have read an article which has a concrete example of how they can help and how they work to pay off debts a person owes.

There are some people who have accumulated so much debt on their credit cards that it has become too much of a challenge to pay more than the monthly premium. They then find viable option to use a debt consolidation company.

Consolidation company works in a very simple way. It takes your debt and consolidates it under one bill which is paid to the company. The consolidators then pay all your debts. They will try to negotiate lower interest rats with your debtors, work to change your due dates and sometimes convinced creditors to waive extra fees and charges that are making it much more difficult to pay them. They are going to pay each company separately and allocate a higher portion of the total amount to the creditors with the highest interest rate. After the card is paid off, the money they were paying then gets split among the other debts and it will snowball until all the bills are paid.

Here is an example:
For instance, Tom owes $15,000 in credit card debt to three different companies, one card that has a 15% interest or a $200 per month minimum, one at 22% (250/mo. min.) and one at 16% at $200/mo.min.). If he just make his minimum payments of $650 combines, he will be able to pay off his debt over the next 20-30 years. And if he does not use his credit cards again. So, Tom hires Company Z to consolidate his debt and pay off these bills fast.

Company Z will compile a list of his creditors and negotiate a lower interest rate on each one. In this example, Company Z was able to lower each of his interest rate to 7%. They can do this because they will assure the credit card company that the payment will be on time. Company Z has now lowered Tom's monthly payments and Tom can more easily afford to pay the debt and he no longer need to write 3 separate checks every month and he will be able to pay off these 3 balances in less than 6 years.

Debt consolidators don't do this for free even if they are one of the few nonprofit consolidators. There is usually a one-time fee from $50 or up or a monthly fee which is based on a percentage of the bill. But with the savings Tom can get from lowered interest rates, he can afford that little bit extra expense.
Tom will also expect to see tow other side effects, a lower credit score for a while and he cannot apply for a new credit.
Joining a consolidation program will show on credit report and will remain there for at least 7 years. It won't look good to a bank that wants to give you home loan but is is better compared to filing a bankruptcy. Debt consolidation company does not allow you to open a new line of credit without specifically receiving their permission. This is due to the nature of credit card debt and how difficult it is to pay it all off.

The reason they told you to call them when your bills are past due is because they want to help you "settle your debt" not "consolidate your debt". There is a big difference. Settling your debt will hurt your credit score. It won't as bad as filing bankruptcy, but it's pretty rough.

I know so much about it, because I went through it. What a rocky, rough ride it has been. I paid a company 6,000 to help me with debt settlement because I thought it was the thing to do. What they had me do is stuff I could have done on my own. I could saved my 6,000 and ruined my credit myself. To anyone who is thinking about debt settlement, please check online sources on how to do it yourself, or talk with a professional who isn't out to get your money. I am not a professional by any means, but I thought I was saving my credit and I wasn't.

If you a wanting to do a debt consolidation, you are better off trying to get a loan from a bank. If they want the bills to be past due, it's a settlement, not a consolidation.

Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their debt counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Credit counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial credit counseling session typically lasts an hour, with an offer of follow-up sessions.

Debt Management Plans: If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP). A Debt Management Plan alone is not credit counseling, and Debt Management Plans are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a Debt Management Plan is appropriate for you, a reputable credit counseling organization still can help you create a budget and teach you money management skills.

In a Debt Management Plan, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees, but check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments, and could take 48 months or more to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You may have to agree not to apply for — or use — any additional credit while you’re participating in the plan.

I invite you to use Propser.com for your personal loan needs. Essentially you list the loan amount you need and the community of investors contributes money towards the total amount of your loan. You then take out the loan and make monthly payments, with decent interest rates.

I have taken out loans several times to take for debt consolidation and purchasing a vehicle. Signing up is easy and the qualification process is straight forward.

* Create your listing
* Lenders choose to invest in your plan
* Receive your money
* Make monthly payments

Sign up now!

A debt-consolidation company takes the heat or stress off of an individual in debt, if the right debt-consolidation company is chosen. The point of view of these companies is not to place credit history in jeopardy, if it is thought about an individuals credit is already in jeopardy when they are in debt but they rather help sort things out. Companies who are owed money, need that same money to survive and it is always in a companies best interest to accept reasonable payment plans, rather than nothing if someone files for bankruptcy. When someones agrees to get help with a debt consolidation company, a good company will first find out how much an individual needs out of their income to survive and they even include the cost of cigarettes. Then the remaining monthly income balance is spread between debts. The company usually provides a client with free postage return envelopes and instruct the client to place any and all bills that arrive through the mail, in an envelope and post it to them. They also usually instruct that if any companies call for money etc.. that the client must forward the companies on to them, taking all the stress of the debt directly away.
An agreement is signed and the client promises that if they come into any further monies, that they will notify the debt-consolidation company and stay honest with them. Circumstances change and people get better jobs etc.. and when the debt is cleared the consolidation company can also help to clear negative credit history.