Put simply, the purpose of debt consolidation services is to efficiently negotiate on a clients behalf to substantially lower the amount of repayment a creditor will accept in order to satisfy the individuals debt and close out their account. By far, the most common use of debt consolidation services is for paying off high credit card debts.

Many people find themselves in awful financial situations after a period of years when theyve misused credit cards and are in a situation where they have too little income to cover the required minimum monthly payments. Enlisting the help of debt consolidation services is a more appealing alternative than destroying ones credit history or taking drastic action such as filing for bankruptcy.

The real power behind debt consolidation companies is their ability to negotiate with your creditors in your behalf in an effort to reduce the total amount you owe them. Viewed from the creditors perspectives, most would rather get a fraction of what you owe them if the only realistic alternative is getting nothing because youre forced into filing for bankruptcy. Debt consolidation services use this fact to your advantage as they go to bat for you with your creditors and work to get each to accept a smaller amount than the total you owe.

Another aspect of your dealings with one of these debt consolidation services is that you actually pay the company, not your creditors. The debt consolidation company will organize your payments, while you make only one monthly payment to the general fund held by them. In this way, you save money by owing each creditor less and save time and headaches by minimizing the number of checks you have to write every month for debt payments. Debt consolidation services are responsible for doling out the money in your account to the individual creditors.

Essentially, these debt consolidation services are buying your debt at a fraction of the total amount. The debt consolidation company benefits by earning money both on the initial set-up fees for creating your account, and from the relatively modest interest rates they charge you as you make your monthly payments to them. Each of your creditors benefits by getting paid in an opportune manner, rather than relying on you and hoping you dont declare bankruptcy or simply stop paying the debt. And, of course, you benefit by reducing both the total amount you owe and the interest charges. Debt that would probably have taken you decades to pay off may then only take you a handful of years to repay.