There are four possible sources of debt consolidation help: banks, private loan companies, credit counselors, and bankruptcy trustees. Debt consolidation is the process of combining multiple debt instruments, such as credit cards and personal loans into a single loan. Through this process, the monthly payment amount required is reduced and more of each payment is applied to the principle. The interest rate on a debt consolidation loan is lower than the average credit card interest rate.

Debt occurs when an individual or business obtains access to money before they have earned it. There are two types of debt: revolving and fixed term. Revolving debt is available with a credit cards or lines of credit. Each payment reduces the amount owing, and those funds are available to borrow against. A personal loan provides a fixed amount of funds and a scheduled repayment plan. Each payment reduces the amount owing, but these funds are not available.

Debt consolidations are typically limited to unsecured debt. Car loans, mortgages or loans used to purchase a specific asset are considered secured loans. An unsecured loan is provided based on your credit rating and repayment history. Traditional banks offer debt consolidation loans as one of the most popular products. Lending requirements differ between institutions, but most banks will require a good credit rating, proof of income and a low debt service ratio.

The debt service ratio is a calculation of how much of your income is spent on payments to your outstanding debts. The calculation is net monthly income divided by total monthly payments to all debts. The ratio can be no larger than 30% for you to qualify for debt consolidation help from a bank. Private loan or financing companies have the same review process as a bank, but are willing to accept a higher debt service ratio and a less than perfect credit rating. They often charge additional administrative fees, which increases the total cost of the loan.

Credit counseling organizations are non-profit groups that provide advice and assistance to people in debt. They can work with your creditors to consolidate your debts, negotiate a lower interest rate, and reduce your monthly payment. It is important to note that this process may affect your credit rating.

Bankruptcy trustees can offer debt consolidation help by advising you on the different options available to you. Although they do not offer any actual debt consolidation tools, the additional information is valuable when deciding if a debt consolidation is the best option for you, or if you need to consider alternative solutions to manage your debt.

Books, magazine and financial publications provide a wealth of information on how to follow through on the debt consolidation help you received. Stick to the plan and do not miss any payments. It is important to note that most plans are no more than three years in length.