Should You Pay a Debt Consolidation Company?

I recently received a reader question regarding debt consolidation services:

Hi Ryan,

Do you have any recommendations or advice for someone looking to consolidate their debt? I’ve got too much debt right now and I’m struggling to meet my monthly payments.



Hello Shawn,

Thank you for your question. Several months ago I answered a similar question on Cash Money Lifewhich debt to get rid of first? I pointed her to Dave Ramsey’s Baby Steps. Both of these articles cover the same topics, but the second one is the introduction to a series written by several bloggers.

Dave Ramsey’s Baby Steps calls for you to:

  • assess your situation
  • make the commitment to get out of debt
  • get current on all debts
  • focus on repaying what you have using the snowball method

As for consolidating your debt, that may or may not be necessary. Most debt consolidators just charge you to do something you can do on your own. I recommend investigating these steps first to see if you can make a plan that will get you out of debt without going to someone else. Here is how to do your own debt consolidation plan.

If you determine you still need a debt consolidation, then there are many options. But be sure to read the small print concerning how much you will be paying – not only per month, but in total interest. Sometimes the debt consolidation loans will lower your payments to an easy payment, but stretch your payments out several years. Also make sure you understand which fees you are paying them. Here are more reasons you should not pay for debt consolidation.

Personal loans may be another option to paying a debt consolidator. You can always try talking to your creditors to try and lower your payments or the interest rates you pay, or you can look into taking a personal loan through your bank, or from a peer to peer lending company such as Prosper, Lending Club, or Loanio. These companies allow borrowers to borrow money from other individuals at rates that are generally lower than the rates they can get from a bank. Again, read the terms and conditions, and do what is best for your situation.

Without details, it is tough to give anyone real advice, but the principles outlined in the articles I linked to may be helpful. Just remember, the most important thing for you to do is change your current lifestyle to get away from adding more debt – and focus on repaying the debt you have now.

Good luck, Shawn.

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Date published: November 13, 2008. Last updated: November 9, 2009.

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Ryan Guina is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is currently serving in the IL Air National Guard. He also writes about money management, small business, and career topics at Cash Money Life. You can also see his profile on Google.


  1. says

    This is great advice for a lot of reasons… mainly because the OP recognizes that without specific details it is hard to give advice that will lead to where you want to go. Bills add up, what with housing, food, transportation, and insurance, and a plan will help you get there. I’m a fan of Ramsey as well. Good luck!

  2. says


    Thank you for your comment. Prosper is still actually around, though they have entered a “quiet period” while awaiting a response from the FTC regarding a recent filing (to allow the sale of current notes between lenders). They continue to make loans, but only on a limited basis.

    The best bet is for someone to work closely with his/her lenders and try to work out an agreeable arrangement. Even more important though is to change those spending habits! :-)

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