Debt Consolidation
Debt consolidation, just like credit counseling, is just another method of helping you reduce your payments and is not really a form of debt reduction.
Just as the term 'consolidation' suggests, this is merging or combining debt. When you consolidate your debt, you actually bring the total principle of many different debts into one debt. If your credit is in good enough standing to do this, or if you have something to secure the debt against, you will more than likely reduce the entire interest to well below what you were paying on your all your individual debts prior to consolidating.
There are a few dangers to consider when consolidating debt however.
The first problem is you pay off all your credit cards. I'm sure you're thinking, "well how can that be bad?" You must be in 100% control of your spending habits and be disciplined enough to NOT use those cards again. You absolutely have to cancel those credit cards and stay away from revolving, unsecured debt. If you just got through combining all those debts into another loan, you will have the payment on that new loan now. Although this monthly payment should be considerably lower than what you were paying on all the individual debts prior, you still don't want to run out and run up your credit cards again. This will cause you serious financial trouble.
Another danger when consolidating debt is taking out equity in your home to pay off those cards (this is a common practice). Now you've increased your house payment AND you used your HOUSE as collateral. Although it's understandable that this might be a good solution, especially if you have a solid, well paying job, there might come a time where you can't pay the greater house payment. Now you run the risk of losing your home, which is absolutely not a good thing.
The main things to remember about debt consolidation are 1) you should to be in good financial shape to do this, with a steady and secure job. You are essentially trading one debt (or many) for another. Yes your payments will drop, but you have not 'reduced' your debt in anyway, just the amount you will pay for it in the long run. And 2) you must be disciplined enough to say "NO!" to further use of high interest unsecured debt, especially credit cards. Using your cards after consolidation can really quickly get you into worse trouble than you were prior to consolidation.