Hmmm….another one of these “How do I diet without dieting?” questions. All sarcasm aside, this request for information is fairly common, so I thought give my thoughts on the matter.

Q. How Can I Consolidate my Debt without Paying Fees?

A. I assume when you say “consolidate”, you mean that you want to take out a new loan and payoff your debt by making one payment. The short answer: there are no ways to consolidate your debt “for free”. That being said, you do have options, and here they are:

1. CCCS
One option is Consumer Credit Counseling Service (CCCS). There are some caveats with using this kind of company:

• You must “qualify” for the program. If you are currently not working, you will not qualify because you have no income to pay off the debts.
• They strictly handle credit card debt, not collection accounts, student loans, auto loans or mortgages.
• The CCCS organization you choose is making money on your consolidation by receiving a part of the waived interest and or principal as their management fee. This is not an cost to you, however.
• Your credit can be severely impacted, if not destroyed, by entering a CCCS program. This is why using this kind of service is not free. You pay for it by ruining your credit which could cost you losts of money down the road.

2. Debt Consolidation Companies.
The second option is to a “professional” debt consolidation company. With this type of company, you are going to not only pay big fees for this service, but have your credit ruined as well. Just like CCCS, many people don’t realize that debt consolidation companies don’t handle collection accounts, student loans, auto loans or mortgages. They strictly handle credit card debt.

You have to be really cautious about these types of companies. Many of them are currently being shut down or investigated by the Federal Trade Commission. Please read our article on the dangers of using debt consolidation/debt settlement companies.

3. Taking out a Second Mortgage to Pay off Debt
The problem with this method is there are a few obstacles these days to getting a second mortgage: credit is hard to get, and you may find yourself with no equity in your home after the housing crash. If you do manage to get a second mortgage, you are going to be paying interest on the loan. This is certainly not a free option.

4. Do-It-Yourself Debt Settlement
This way no money, per se, but you’re going to have to do some work. In addition, your credit is probably going to take a hit.

Doing it yourself consists of calling up the credit card companies yourself and making debt settlement deals. This is not as scary as you might think. Credit card companies are terrified of the large impending credit card defaults, and are willing to make some good deals. How willing they are has been covered in the press lately, with some companies willing to accept 30% of the total balance as a settlement offer. (Really!)

If you find yourself in this of too much credit card debt – which method did you use? Did you have to pay? Tell us by leaning a comment.

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