When you are bogged down by a large number of unpaid bills and are unable to afford monthly repayments, then debt consolidation might just be the solution to your problems. You must have heard of this term, but to consider it seriously, you need more information. Do not confuse consolidation of debt with bankruptcy, neither is it a regular loan. This is actually a program run mostly by non-profit organization. Their basic aim is to get you a repayment program where the rate of interest is low and you don't end up paying more in terms of late payment and penalties.

 How Does This Program Work

 Let's look at the debt consolidation program in simple steps so that you get a fair idea of this concept:

Step 1: You approach an organization which offers these programs and they will provide you with a counselor.

Step 2: Now you provide the counselor with the names, numbers and balance of the accounts, i.e. the debts you want to combine. The counselor will work out a budget for you and this will decide what amount you can spare every month to repay these debts.

Step 3: He/she will then contact your creditors and work-out a repayment schedule. The debt consolidation company may charge you a small percentage of repayment as fee for its services.

Step 4: You will now pay the monthly payment to the counselor, who will pay it to your creditors on your behalf. Also, all calls regarding collection of debt will now be directed to the counselor, not you.

Step 5: The accounts (credit card accounts etc.) which you have placed for consolidation will be frozen until they are paid fully.

 Ensure You Are Getting A Good Deal

 While going for debt consolidation, do remember to calculate your interest to ensure that you are actually paying a lower interest and your outflow has reduced. Do not forget to keep track of all your accounts through the statements, to ensure that your counselor is making the repayments on time. This program ideally eliminates all late payment fees and penalties, thus making your credit report look better with just one outstanding loan. By repaying it every month, you can build up a good credit rating.