1) Getting a loan to pay off all debts to consolidate your bills into one lower payment. If you do this, go through a local bank. Often, when people get this sort of loan, it's simply too tempting to start using all the newly available credit on their credit cards again and they quickly find themselves in twice as much debt as when they started. If you take this type of loan, when you cards are paid off with the loan….call all your credit card companies and request voluntary credit limit reductions to $1,000 to prevent this from happening

2) Debt consolidation also refers to a dangerous practice of deliberately defaulting on your credit cards to try to force your creditors to settle for less.

Stay away from any "debt consolidation" company that promises to cut your debt and payments in half through debt settlement….This is a risky tactic of deliberately ceasing all payments to creditors and forcing your accounts into default to attempt settlements. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator's fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating for sure. Debt settlement is like a roll off the dice with your finances…You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.

Many people who sign up with “debt consolidation” firms incorrectly assume that they have the power to force your creditors to accept settlements…they don’t. Your creditors have the right to refuse settlements and take you to court.References :