Let us get one thing clear about debt consolidation. It is not, repeat NOT simply adding your debt due to various creditors and consolidating the debt into one.
For you to successfully consolidate your debt, five things must happen.
1. Your effective interest rate must reduce for the entire term principal is outstanding. Let us assume you have a 5 year loan for $100,000 at 8% and another $100,000, 10 year loan at 15%. If you were paying these loans separately, your total payments (principal and interest) over the life of 1st loan would be $121,658; your second loan payment would total $196,601. So total of both loans over the life of the loans would be $315,259. Now find out what the total payments would be under the consolidated plan. See, here is where some debt consolidation companies can fool you. They may stretch out your loan period, "shove" future interest payments into principal and play all kinds of games. Be wise. If, in this example your total payments under the consolidation plan the consolidator is offering is not reduced at least by 25%, it is not worth it. So the new total payments, irrespective of loan period must not be more than $237,000.
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2. If debt piled up due to spending, your spending habits must drastically change. You should become a net saver. At the very least, you should not have a negative cash flow.
3. All litigation (i.e. collection, lawsuit, garnishment etc.) must stop for ever.
4. You must never have to pay a fee to anyone. At the most, you may have to pay nominal expenses of recording the new documents--mind you, recording fee, not lawyer or documentation fees. They must all be paid by either the creditors or waived for you.
5. You must not have to file, or consent to file, personal bankruptcy. Remember I said personal bankruptcy. It is OK, as a last resort, to file corporate or institutional bankruptcy for one of your corporate holdings. The reason is this--personal bankruptcy ruins your financial health in a big way for 7 to 10 years. Unless you have absolutely no other choice, avoid personal bankruptcy.
The best advice from many experts for debt consolidation is this. Stay away, if you can, from any of the advertised debt consolidation firms that make a living off of their clients. Their interests are generally not aligned with yours. Go to the National foundation of Credit Counselors or similar non-profit organization.
Good luck
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