Debt Consolidation Programs

Learn about the best nonprofit credit and debt consolidation programs that can help you consolidate your bill payments and become debt free. Get free debt consolidation help, online, or over the phone.

About Credit and Debt Consolidation Programs

What is a Debt Consolidation Program?

Debt consolidation programs are safe and effective solutions for consumers having problems with credit card debt.

The goal of a consolidation program – or credit consolidation program as it is sometimes called – is to refinance your debt by

  • Reducing the interest rate
  • Lowering monthly payments
  • Making just one monthly payment

The single, monthly payment was cited in a 2018 U.S. News survey as the top reason for consolidating debt. It relieves the stress that comes from dealing with too many credit cards and too many payment deadlines.

The toughest question about debt consolidation is whether to do it with – or without – a loan. Examine both options before deciding which is the best fit for your situation.

There are four debt consolidation programs that can eliminate credit card debt: debt management programs; debt consolidation loans; debt settlement; and bankruptcy. The first two are aimed at consumers who have enough income to handle their debt, but need help organizing and dealing with it. The other two apply to consumers in desperate situations where the debt has reached drastic levels.

If you’re not sure where you stand, a good starting point is to call a nonprofit credit counseling agency. A certified counselor will go through your income and expenses, then offer free advice on which consolidation program is best suited to your situation.

“Credit Counseling will develop an action plan that is tailored to your exact needs,” Rebecca Steele, Chief Executive Officer for the National Federation of Credit Counseling, said. “When you’re in debt, you need to understand your budget, what it’s going to take to resolve your debts and how you can put fair, affordable payments in place to achieve that goal. That is what credit counselors should do for you.”

Ultimately, you, the consumer, must decide whether debt consolidation helps you eliminate credit card debt.

Nonprofit credit consolidation companies provide you with the convenience of making one monthly payment to help you become debt free.

Take Control with InCharge

Our nonprofit debt consolidation program can lower your interest rates and combine your credit card bills into one convenient monthly payment.

Consolidate Your Debt

How do Credit Consolidation Companies Work?

Credit consolidation companies work by finding an affordable way for consumers to pay off credit card debt and still have enough money to meet the cost of basic necessities like housing, food, clothing and transportation.

The term “credit consolidation companies” covers a lot of ground in the debt-relief industry. They range from giant national banks to tiny nonprofit counseling agencies, with several stops in between and offer many forms of credit card debt relief.

To simplify things, it is easiest to divide credit consolidation companies into two categories:

  • Those who consolidate debt with a loan based on your credit score
  • Those who consolidate debt without a loan and don’t use a credit score at all

Banks, credit unions, online lenders and credit card companies fall into the first group. They offer debt consolidation loans or personal loans you repay in monthly installments over a 3-5 year time frame.

They start by reviewing your income, expenses and credit score to determine  how creditworthy you are. Your credit score is the key number in that equation. The higher, the better. Anything above 700 and you should get an affordable interest rate on your loan. Anything below that and you will pay a much higher interest rate or possibly not qualify for a loan at all if your score has dipped below 620.

The second category – companies who provide credit card consolidation without a loan – belongs to nonprofit credit counseling agencies like InCharge Debt Solutions. InCharge credit counselors look at your income and expenses, but do not take the credit score into account, when assessing your options.

Based on the information provided, they recommend debt relief options such as a debt management program, debt consolidation loan, debt settlement or filing for bankruptcy as possible solutions.

If the consumer chooses a debt management program, InCharge counselors work with credit card companies to reduce the interest rate on the debt and lower the monthly payments to an affordable level. Debt management programs can eliminate debt in three years, but also can take as many as five years to complete.

If the debt has spiraled out of control, counselors could point you toward a debt settlement company or a bankruptcy lawyer.

Debt settlement companies make enticing claims on tv and radio advertisements – “We’ll settle your debt for half of what you owe!” – but those claims are extremely misleading. Creditors do not have to accept settlement offers and some won’t. The actual amount debt forgiven often is far less than promised.

Bankruptcy is the “nuclear option” when all other possibilities have been exhausted. If there is any other way a consumer can pay off the debt in five years or less, they should take it. If not, bankruptcy is a viable option.

Bankruptcy filings are extremely successful – 95% of Chapter 7 filings had their debts discharged in 2017 – and consumers get a chance to start all over with their finances. However, the bankruptcy filing is on your credit report for 7-10 years and you may find it very difficult to qualify for any kind of credit during that time.

Traditional Credit Consolidation through a Consolidation Loan

Man with list of many debts that need to be consolidated

The traditional form of credit consolidation is to take out one big loan and use it to pay off smaller loans. Because you now only have one loan, you have one monthly payment, which simplifies the bill-paying process.

However, taking out a big loan can be tricky. Lenders tend to rely heavily on your credit score as a signal that you will repay the loan. If you have a low credit score, they might deny you a loan altogether or, at the very least, charge you a high interest rate.

Additionally, whenever you take out a new loan, there are loan origination fees which add even more to the cost of the loan. Finally, if you do secure a debt consolidation loan at a lower payment, you most likely will have an extended repayment period, meaning a 36-month loan just turned into a 48-month loan and you’re paying the difference.

Quick reminders about credit consolidation loans:

  • The interest rate charged on the loan is based on your credit score. Low score means high interest rate.
  • You likely will pay a loan origination fee of some sort. It varies from lender to lender, but count on paying somewhere between 1% and 3% of the loan amount.
  • Thinking of using a co-signer to help lower the interest rate? Most consolidation lenders don’t allow it. Check that before you reach an agreement.

If taking on a loan to consolidate credit card debt makes you nervous, examine the other obvious option: Debt Management Programs.

“Debt management is the easiest way to repair your credit,” Steele said. “People in a crisis situation need to find a simple, affordable repayment plan, something that is going to successfully eliminate their debt. That is what debt management does. The easier you can make it, the easier it will be for people to stick with it and be successful.”

How Do I Consolidate Credit Cards with a Nonprofit Company?

All you need is a phone or internet access to get free, expert advice from a nonprofit credit counselor on consolidating credit card debt.

It is best to have accurate information available concerning your income, assets, expenses and amount of debt before starting the process.

With that in hand, here are five simple steps to help you decide what form of credit consolidation will help you get out of debt and stay out of debt.

  1. Call a nonprofit debt counselor or choose online debt consolidation with a nonprofit credit counseling agency like InCharge Debt Solutions.
  2. Authorize the agency to access a list of your credit card debts and monthly payment information from your credit report.
  3. Complete a budget, detailing your monthly income and expenses.
  4. Determine how much money you have available each month to pay toward credit card consolidation.
  5. Choose a consolidation solution, whether it be a debt management program, debt consolidation loan, debt settlement or bankruptcy.

InCharge credit counselors specialize in creating a budget that minimizes your monthly expenses. They will offer free advice on a debt-relief solution that is tailored to your situation. If they don’t have a program that you qualify for, they will refer you to other nonprofit agencies that save you money and help eliminate debt.

Start online credit counseling to see if you qualify for our debt consolidation alternative. During your free counseling session, we’ll help you identify the root cause of your financial problems. We’ll also help you develop a budget that minimizes your monthly expenses. Finally, based on your income, assets and budgets, we’ll recommend a debt relief solution tailored to your personal situation. This solution may be the debt management plan which consolidates your monthly payments. Other solutions include bankruptcy and referrals to other nonprofit organizations who can help you save money and eliminate debt. If you’d prefer to speak with a live counselor, call the number on the right.

Debt Settlement Example: National Debt Relief

Debt settlement sounds like a sexy option to consolidate debt. Who wouldn’t want to pay half of what you owe on credit card debt? But this is considered a desperation measure for a reason. The ads boasting that settlement companies like National Debt Relief can get 50% of your debt forgiven, don’t tell the whole story. That figure doesn’t include the fees you will pay, the penalties you incur while settlement negotiations take place and whether a creditor will even accept the offers made. Do all the math before you choose this option.

How it works: Settlement companies ask you to stop paying the credit card companies and instead, send regular payments to an escrow account. When the balance in that account has reached a sufficient level, the settlement company negotiates with the card company for a reduced, lump-sum payment. If the creditor agrees, money is sent from the escrow account. If there is not enough money in the account, a payment schedule is agreed upon.

Fees: National Debt Relief charges 18%-25% of the original debt, which is in line with most companies in this business.

How long does it take? Debt settlement programs take two to four years to complete.

Effect on credit score: Your credit score will dive. Creditors do not like it when they are paid less than what is owed. Expect your score to go down 75-125 points.


  • You will pay less than what you actually owe.
  • If the creditor is willing to negotiate and you have enough money to make an attractive offer, this process could be over in less than a year.


  • The creditor doesn’t have to accept your offer, regardless of the amount.
  • Debt settlement is barred in 12 states in the U.S.
  • Late fees and interest on the balance owed grow every month until a resolution is agreed upon.
  • By the time you pay fees for the service and the penalties for late payment, your net reduction likely will be closer to 25% of what you originally owed.
  • The amount of debt forgiven is considered taxable income if it is over $600.

Debt Consolidation Example: Lending Club

Debt consolidation loans are the oldest form of consolidating debt and there are plenty of options available. There are just under 5,000 banks in the U.S., another 6,000 credit unions and new online lenders popping up on the web every week. They all want to offer you a loan to pay back the loan you took from the credit card companies.

How it works: Whether it’s at a bank, credit union office or online, the consumer must fill out an application and be approved for a loan. Your income and expenses are part of the decision, but credit score is usually the deciding factor. If approved, you receive a fixed-rate loan and use it to pay off your credit card balances. You then make a fixed monthly payment to the lender to pay off your loan.

Fees: Fees vary widely, depending on the lender. Lending Club charges an origination fee (1% to 6%, depending on the size of the loan) that is based on your credit score and information in your application. There is a late payment fee of $15 or 5% of your unpaid payment amount, whichever is greater.

How long does it take? Loans are for either three years or five years. There is no penalty for pre-payment of the loan.

Effect on credit scores: Applying for a loan has no effect on your credit score, but making (or missing) payments will.


  • Individual investors fund the loans and may be willing to take greater risks than banks or credit unions.
  • Can borrow from $1,000 to $40,000.
  • Lending Club boasts that borrowers pay almost one-third less in interest than competitors.


  • The origination fee is subtracted from your loan amount. For example, if you borrow $6,000 and the origination fee comes to $300, you would receive a check for $5,700, not $6,000.
  • Interest rates vary from just under 6% to just under 36%, based largely on your credit score. In some cases, you might be paying more interest on a loan than you are on the credit card.

Nonprofit Debt Consolidation Example: InCharge Debt Solutions

A debt management program consolidates your debt without you having to take out a loan. In other words, you don’t need a loan to pay off a loan. It is administered by a nonprofit credit counseling agency like InCharge Debt Solutions, which offers financial education alongside the program so that consumers learn from the experience and aren’t likely to repeat it again.

How it works: Credit counselors at InCharge Debt Solutions go over your budget, income, expenses and debt with you to see if you qualify for a debt management program. If you do and join the program, you agree to send a monthly payment to InCharge, who then distributes it to your creditors in agreed upon amounts.

Fees: There is a set-up fee that varies from state to state, but most states are in the $50-$75 range. The monthly service fee for most states is $20.

How long does it take? Debt management programs are created to pay off debt in 3 to 5 years. However, there is no penalty for paying it off faster.

Effect on credit score: Your score will drop initially because all but one of your credit card accounts should be closed. However, if you make on-time, monthly payments for more than six months, your score will improve because you are reducing your debt.


  • There is no loan and your credit score doesn’t matter.
  • Reduced interest rates (somewhere around 9%, sometimes less) help lower monthly payments.
  • Credit counselors assist in developing an affordable monthly budget.
  • Financial education offered to keep this from happening again.


  • If you miss a monthly payment, all concessions granted by the creditor could be canceled.
  • There is no reduction in the amount of debt owed.

Features of the Best Debt Consolidation Companies

The decision to consolidate debt is a serious commitment. If you are struggling to keep up with credit card debt, this is a step in the right direction. However, approach it cautiously. Understand that not all programs will work for your situation. Here are 10 things to consider before making a final decision.

  1. Research the company’s reputation, either by looking them up on the Better Business Bureau website or seeing customer reviews on websites like Trustpilot. If a family member or friend has experience with the company, find out how they were treated and was the program a success.
  2. Be certain, above all else, that the credit consolidation program reduces the interest rate on your credit card debt and that translates to a lower monthly payment. If you don’t get those two things in writing, move on.
  3. Get the advice of a certified credit counselor before consolidating your credit card debt. Credit counseling offers free debt help and the expert advice could save you time and money. They should recommend the right solution for your situation.
  4. Don’t sign an agreement until you’ve completed a thorough budget and are confident that you can comfortably afford the monthly payments. And don’t just write up a budget. Stick to it!
  5. Agree to stop using credit cards and start paying cash for all your bills. Studies show the best way to eliminate debt is to pay in cash. Consolidating your debts, and then using credit cards to run up more debt, defeats the purpose of getting ahead.
  6. Get at least 3 estimates from credit card consolidation companies before choosing one.
  7. Know that most credit consolidation companies can’t help with your car loan, medical debts, or mortgage payments. Credit consolidation works best on credit card debt.
  8. Make sure you understand the fee structure of the debt relief company you plan to work with. Know that under the Telemarketing Sales Rule, debt relief companies cannot collect upfront fees. They must complete the work, before they get paid.
  9. If you only have one or two credit cards, it may be easier to call your creditors and try to negotiate better interest rates on your own than to pay third party fees for the service. The more cards you have, the harder it can be to manage payments and negotiations on your own.
  10. All forms of debt relief impact your credit score. Ask the credit card consolidation company how working with them will affect your credit score.

Is a Debt Consolidation Program Right for Me?

Assuming your debt is at a manageable level – not so wildly out of control that it’s causing panic every night – this comes down to a “preference” and “math” question.

Do you want to take on any more debt?

If the answer is no, then a debt management program should be your first stop. You get the same set up as a debt consolidation loan – fixed monthly payments for a fixed amount of time – but you don’t have to take on a loan.

If you don’t mind paying off several small debts with one big debt, a debt consolidation loan works.

If you can’t decide between the two … then it becomes a math question.

You can go to a debt consolidation calculator, plug in the numbers and do a comparison. Make sure you compare the total amount spent on payments and the length of time it takes to pay off all the debt. That math should help you make a decision.

FAQs About Debt Consolidation

Can I Use the Debt Snowball to Pay off Debt?

Yes, but this is a real commitment of time and resources. Here is how it works. List all your debts (except your mortgage) from smallest to largest. Pay the minimum due on all debts, but the smallest. Attack the smallest debt with as much money as you have available — $100 a month, for example – until it is paid off.  When that is paid off, take the $100 a month, plus whatever the minimum you were paying on the second smallest debt, combine them and go after the second debt. Keep repeating until you have gone through each debt. The idea is to gain momentum in your bill paying by having success.

Can I Consolidate Debt With Bad Credit?

Unlike traditional debt consolidation loans, a nonprofit debt management program can help you lower your interest rates and consolidate debt with bad credit. That is because a debt management program isn’t extending new credit or a loan to you. They are simply helping you bundle your payments and make them on-time, and helping you lower your interest rates, despite a poor credit history. Why? Creditors may see you as a bankruptcy risk. By giving helping make your payment more affordable with lower rates, and supporting nonprofit debt consolidation programs, the creditors are attempting to prevent you from defaulting on your debt.

What about Medical Debt Consolidation?

In most cases, medical debt has no interest rate attached to it so there really is no gain by including it in a debt consolidation program. Remember the key elements of debt consolidation are: a) a reduced interest rate; and b) lower monthly payment. The one advantage to medical debt consolidation is that it becomes part of your single, monthly payment and could help you pay off the debt faster.

If you are facing high medical bills with decreased income and depleted assets, you may qualify for medicaid.


About the author

Veteran journalist/blogger Tom Jackson has worked for newspapers in Washington D.C., Sacramento, Calif., and Tampa, Fla., racking up state and national awards for writing, editing and design along the way. Tom also has been published in assorted sports magazines, and his work has been included in several annual “Best Sports Stories” collections. Most recently, his blogging for various websites on the 2016 election won a pair of top honors from the Florida Press Club. A University of Florida alumnus, St. Louis Cardinals fan and eager-if-haphazard golfer, Tom splits time between Tampa and Cashiers, N.C., with his wife of 40 years, college-age son, and Spencer, a yappy Shetland sheepdog.