Many consumers are finding themselves in debt as never before. As jobs are lost and the economy tumbles further into trouble every day, many people are forced into considering some sort of debt consolidation program. If this sounds like you, be careful of the choices you make and understand the ones available.

There are a few very viable ways to reduce your debt and still pay off the amounts you owe. These debt consolidation methods revolve around lowering your interest payments while keeping your principle balance the same. In other words, you aren’t trying to find a way to reduce the amount you actually owe a company. You are simply trying to get them to agree to reduce the fees they charge in order to make it profitable for them to have loaned you that money. (Credit cards, auto loans, mortgages – they are all the same.)

There are two ways to reduce your debt: one, by reducing your interest rates and two, by reducing your principle amount. Find a way to reduce your interest is always the best approach. It won’t affect your FICO score or hurt your credit rating in any way. It could even help if the reduction helps to free up more money each month with which you can begin to pay all your bills on time.

Having your principle reduced is another matter. This does affect your credit history. Your creditors, even though they may have agreed to lower your principle amount, are now reporting this to the credit bureaus as partial payments and discharged debts. This is almost as bad as having a bankruptcy on your credit report!

These same companies typically charge some hefty fees for these services, and they want their money up front. Others ask for monthly payments because they say they continue to work on your behalf. Usually they do nothing once they get your money.

Be very wary of any company that insists you send them money each month so that they in turn can make your payments for you. This is a common scam. They explain to you this is for your benefit since you have trouble paying your bills.

Do not pay money for a debt consolidation program. You have the same right o negotiate with your creditors. If you find you can’t pay your bills, either think about declaring bankruptcy or allow your creditors to take you to court to have a judgment made about how much you need to pay. Sometimes this is the best way to go!

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