A free debt consolidation service is a consumer-friendly organization that seeks to help borrowers who need help managing debt. This often takes the form of a consumer credit counseling service. Consolidating debt is one of the quickest ways to bring debt under control, as long as the lenders are all in agreement. Not all consumer credit counseling centers offer free debt consolidation service. Some may require a fee. Therefore, it is important to check before agreeing to anything.

The main job of a free debt consolidation service is to contact all creditors with whom the borrower has unsecured lines of credit and outstanding balance. Then, the counselor will attempt to get the lender to alter the original agreement to terms more favorable to the borrower. The counselor will then explain to the creditor what the situation is, and how he or she can be of service. At this point, the credit counselor must explain why it is in the best interest of the lender to do this.

In some cases, the pitch from the free debt consolidation service may be successful, and in others it may not. Though a similar tactic may be tried with secured credit accounts, such as car loans, the lender will be less inclined to bargain as real property can be confiscated if the terms and conditions are not meant. Therefore, the success rate in renegotiating secured credit lines is usually lower. Of course, if the value of the property is decreasing quickly with time, this could shift the balance in the borrower's favor.

There are two terms that the free debt consolidation service may seek to get changed. The first term involves extending the payments over a longer period of time. This will lower the monthly payment obligation. The other strategy is to seek a lower interest rate. Over time, this could help the borrower save significantly. It also means the lender is getting a profit on the investment, though perhaps a smaller profit than initially thought.

Once the terms have been renegotiated, a lump sum payment for all the bills will be determined. In many cases, the borrower can then send a single check each month to the free debt consolidation service. The service will then distribute the money among all the lenders as the bills become due.

The free debt consolidation service is able to offer free services to the lender because of two main funding streams. The first one comes from the lenders themselves, who may recognize the value of the service and how their investments are being protected through its utilization. The second funding source may be in the form of grants, which may be available through the government to help consumers when difficult times hit.