Debt consolidation is quite simply when you take a quantity of debts (typically at very high interest rates) and combine them into only one (at a lower interest rate). For the borrower this diminishes expense of carrying the debt, as well as adding the convenience of no longer needing to handle as many bills and creditors every month.
Debt consolidation works better when you are turning a bunch of loans that are unsecured in to one secured one, which usually means possessing some collateral like a house or some other valuable asset that can be put up. Secured loans will usually carry the lowest interest rates, which means the most savings for the consolidator.
That doesn't necessarily mean you aren't able to consolidate your debts without any collateral, although the interest savings might not be quite as significant due to the fact that the rates on the unsecured loan will be higher.
While specific debt management companies will really lower your actual debts by decreasing the balance owed to your creditors; this is really debt negotiation (also called debt settlement), despite regularly being referred to as the same thing.
If you have high interest debts, whether they're credit cards, medical bills or student loans; consolidating your debts is more than likely a good option for you (provided you have the security to put up). The lowered interest rates will allow you to decrease your overall payments and pay off debts faster, and with less hassle.
While the process of debt consolidation doesn't have to be handled by a company (other than a new source of funding), there are a few firms that typically supply a complete management program that includes debt consolidation. The majority of people with significant high interest debts usually end up going with a debt management program as it can get a little overwhelming taking on the task by themselves.
