Debt consolidation simply means any method of combining all types of debts incurred by an individual from various lenders into a single debt and thereafter consolidating into a single monthly payment. Wherein, you can include all your unsecured debts into your debt consolidation program. Thus, debt consolidation can be an excellent debt solution for any person who is in debt and looking to attain quick debt relief by lowering the interest rates or penalties while making his debt payments more manageable.

Kind of Unsecured Debts which can be included:

- Medical debts
- Credit card bills
- Phone bills
- Utility bills
- Personal loans

The generic process of debt consolidation involves a debt consultant who based on your total amount of debt and its information figures out your financial situation. Thereafter he contacts your creditors in your plan and negotiates on your behalf to settle your debts. And there after providing you with the affordable debt repayment plan. Usually, the firms negotiate for lower monthly payments, interest rates, and reduce or eliminate late penalties or fees. Thus allowing you to pay lower payments and pay off your debts in much lesser time. However, you need to agree to pay on time the agreed lowered amount and stop adding to your debts.

Debt consolidation benefits you in many ways, few of them are mentioned below:

>> One payment instead of several payments: Consolidating your debts combines multiple monthly payments into one single payment and reduces the problem of remembering different due date each month which minimize the chance of being late on the payments.

>> Reduced interest rate and late penalties: The debt counselor negotiate on your behalf with your creditors to lower your interest rate, charges or fees. Consequently it eliminates the portion of your total debt amount.

>> Faster debt relief: You can be debt free within 1 to 3 years depending upon the debt consolidation program you choose and can save a lot on money and time. Debt consolidation with an effective repayment plan and consistent payment can give you quick debt relief.

>> No collection calls: Enrolling into a debt consolidation program can help you avoid harassing collection calls. As the debt consolidation company notify your creditor of your enrollment into the program and explains the situation.

>> Improving your Credit: Usually, the bad credit score or report is a result of late payments and charged-off accounts of an individual. However, through debt consolidation your accounts start getting paid off and eventually raise your score too.

Below listed are the methods which are mainly used to consolidate debts:

Debt Consolidation Loan: This is a type of unsecured loan which allows you to combine several types of debts and consolidate into one lower rate loan. Debt Consolidation loan can be of two types unsecured and secured debt consolidation loan. Secured debt consolidation is where you are offered loan on your collateral. Usually rates of secured loan are much lower than that of unsecured one. You can include any types of unsecured debts to your debt consolidation loan such as credit card debts, loans, medical debts or bills debts.

Debt Settlement: Debt settlement program, also known as debt negotiation or arbitration involves negotiations with your creditors to reduce your payoff balance on debts that cuts total debt of an individual up to 40%-60%, making it to almost half payments. Moreover due to reduced debts, you can be debt free in as fast as 12-36 months. Settling your debts through this program may require a large debt or minimum amount of debt.

Debt Management Plan: It simply means managing your debt by combines all your debts to make an affordable debt repayment plan wherein you have to make one single monthly payment which is distributed among your creditors. Debt Management is not a loan so it enables you to reduce the debt burden without taking additional debts. However, it may take 3-5 years to be debt free with debt management. Debt management plan is often offered by Consumer Credit Counseling Agencies.

Loan Consolidation: Loan Consolidation can be beneficial financial move for those individuals who are finding it difficult to pay off numerous loans with different companies. With a loan consolidation you can combine your numerous loans like education loans, personal loans, etc. and consolidate them into one loan.

Credit Counseling: There are some non-profit credit counseling agencies that offer counseling to the individual with debt problem and help them in developing a self debt repayment plan.

There are some special debt consolidation program known as Military Debt Consolidation Program that helps the armed personnel's and military families to consolidate their debts in an easy manner.

All the above mentioned solutions are somewhat different but there goal is the same that is to get you financial freedom. Before some years, bankruptcy was the only possible option for debtors. And in the process they used to damage their credit ratings. Fortunately now, we have multiple options to payoff our debts and thus avoiding bankruptcy. Debt consolidation is not a difficult thing to meet. But it will definitely be more difficult and stressful repaying your debts on your own.