One of our clients spent TENS of hours researching debt consolidation companies. She and her husband made good money, but their credit card payments were enormous, and they’d already tried personal loans and balance transfers.
She was desperately trying to find a way out of debt, and everything she researched just left her more confused.
Sound familiar?
Well, guess what happened when they decided to skip the debt consolidation company and start calling their creditors themselves?
They negotiated their American Express interest rate from 26% down to 9.99%!
You guys, this is why we get so fired up about debt consolidation.
We’ve watched women pay companies hundreds of dollars a month to handle their debts when they could have been making those phone calls themselves.
Before you sign up for debt consolidation or debt relief, we want you to understand exactly what you’re getting into, what it could cost you, and what you can do yourself.
Here are seven questions we want you to ask before signing anything.
Is debt consolidation a good idea?
We don’t recommend debt consolidation loans or debt relief programs.
We’ve coached women who consolidated their credit cards, only to end up with a consolidation loan AND new credit card debt. We’ve also seen women pay debt relief companies hundreds of dollars a month without making the progress they expected.
That’s why we teach our clients to get organized, build a budget system, and contact their creditors directly to ask about lower interest rates, payment arrangements, and settlement options.
Our advice? Before you pay another company to deal with your debt, find out what you can do yourself.
Want to hear us break down these stories? Listen to episode 643 of Financial Coaching for Women, where we talk about debt consolidation, negotiating with creditors, and what we’d do instead.
First: Debt Consolidation and Debt Settlement Are Different
| Option | How It Works | Watch Out For |
|---|---|---|
| Debt Consolidation Loan | One new loan pays off multiple debts | Interest, fees, longer repayment |
| Debt Settlement Company | Negotiates with creditors for you | Fees, possible missed payments, credit damage |
| Debt Management Plan | A credit counseling agency organizes payments | Fees, account restrictions, repayment length |
| DIY Debt Relief | YOU contact creditors to negotiate | Takes preparation; results vary |
Notice something about that last option? You can call your own creditors and ask about lower interest rates, hardship programs, and payment arrangements.
That’s where we want you to start before paying someone else to make those calls!
Debt consolidation, debt settlement, and credit counseling are NOT the same thing, and it’s important to understand the differences before signing anything. The Consumer Financial Protection Bureau breaks down how each one works.
1. Is This Company Actually Making Progress on My Debt?
One of our early coaching clients had been paying $500 a month to a debt relief company. When we first started coaching her, she had a LOT going on. We were helping her get her budget and life organized, so that $500 payment wasn’t our first priority. But once we circled back to it, we asked her to call the company and find out what they’d actually done with her debt.
“I have been paying $500 a month to this company for years now, and they have done nothing.”
You guys. $500 a month for FOR YEARS.
That’s THOUSANDS of dollars in payments to this program. Can you imagine finding out after all that time that your creditors hadn’t been taken care of the way you thought?
She told us she wanted to throw up, and frankly, we felt the same way!
Here’s what makes this story so frustrating. Once she started calling her creditors herself, she was able to make deals with them. The very thing she’d been paying someone else to do!
Before you enroll, ask: Where does my monthly payment go? Does it reach creditors immediately? Is some of it held for settlements? What fees are deducted? How can I verify the balance of every account and the progress being made?
2. Will Debt Consolidation Actually Save Me Money?
Imagine you’re paying $1,200 in monthly debt minimums. A company advertises one payment of $700. The extra $500 looks like instant relief.
But a lower payment can come from stretching the repayment period, paying more interest overall, or setting aside money for a settlement that has not happened yet. A smaller monthly payment does not automatically mean a less expensive solution.
Compare the total amount you’ll repay, interest, fees, the number of months involved, and whether you can pay extra or exit the agreement. We want you to understand the whole commitment, not just the number that looks good in an advertisement.
Here’s another reason we love handling debt payoff yourself. As you eliminate individual debts, those monthly payments disappear from your budget! So if you’re paying $1,200 in minimum payments right now, that number can start shrinking as you pay accounts off. With one big consolidation loan, you’re generally stuck with that same monthly payment until the loan is paid off.
Also, understand that if you take control YOURSELF with our DIY Debt Relief Workbook, you might be able to lower payments without signing over control AND you’ll be able to slowly lower that $1200 down yourself.
3. Will a Debt Settlement Company Make Me Stop Paying My Credit Cards?
If you’re getting a regular debt consolidation loan, typically no. But if you’re signing up with a debt settlement company, they may tell you to stop paying your credit cards. Why? Because they’re hoping that once your accounts become delinquent, creditors will be more willing to negotiate a settlement. The problem is that YOU are the one dealing with the late fees, damaged credit, and potential collections while all of this is happening.
Hold please. If you’re going to stop paying your credit cards, we think YOU should be the one making that decision.
Before making a decision like that, you need a real budget that shows what you can actually afford. And you need to understand what could happen if you stop making payments.
Because when all is said and done, that debt settlement company gets to go home at 5 o’clock. You’re the one who still has to deal with those credit cards, feed your family, and figure out how to make next month’s budget work.
We coached a woman whose minimum payments simply did not fit alongside groceries, gas, and her other essential household costs. She contacted her creditors, honestly explained what she could afford, and prioritized making arrangements where possible. Some creditors worked with her; others didn’t.
Her situation was a difficult affordability problem, not a reason for everyone to intentionally miss payments. Contact creditors before falling behind whenever possible. Ask about hardship programs and the consequences of any proposed arrangement before deciding.
Some debt settlement companies tell you to stop paying your credit cards, but YOU are the one dealing with the consequences. The Federal Trade Commission explains how this can lead to damaged credit, additional fees, collections, and even lawsuits.
4. What Will I Pay in Fees and Interest?
With a consolidation loan, ask for the interest rate, origination fees, total repayment amount, and how long it will take to pay off. With a debt settlement program, find out how fees are calculated, when they’re collected, and what happens if no settlement is reached.
Be particularly cautious about advance fees. Federal rules generally prohibit certain for-profit debt relief companies from charging a fee before successfully settling a debt and meeting other requirements.
If a company tells you there is ‘no cost to you,’ ask exactly how it gets paid.
Pause…You’re already in debt, and now you’re considering paying someone ELSE to help you get out of it?
We tell our clients to call and negotiate their internet bills, insurance, and phone bills all the time.
So why would we immediately turn around and tell you to pay someone hundreds of dollars to call your credit card companies?
Girl, you have a phone! 😂
We’re not saying every creditor is going to give you some magical deal. Sometimes they won’t offer you a darn thing. But wouldn’t you rather find that out yourself before spending money you don’t have on someone else making those calls?
5. How Could This Affect My Credit, Collections, and Taxes?
Debt consolidation loans, missed payments, debt settlements, and nonprofit repayment plans can affect your finances in different ways.
Late payments and settled accounts may damage your credit. Unresolved accounts may be sent to collections or become the subject of legal action. Forgiven debt can sometimes have tax implications. A new consolidation loan has its own credit and borrowing considerations, but it does not automatically require you to default on your existing accounts.
Listen, we understand wanting a good credit score. Especially if you’ve got a new car or a home purchase coming up.
But we also have women come to us paying thousands of dollars in credit card minimums every month, barely able to afford groceries, and they’re terrified to do anything that might affect their credit score.
We have to look at the whole picture here. What good is protecting a number if the payments you’re making are completely unaffordable?
That doesn’t mean you should ignore your credit score or stop making payments without understanding the consequences. It means we need to make decisions based on your actual finances, not fear of what might happen to one number.
6. Can I Negotiate Credit Card Debt Myself?
This question is where some of our clients have made their biggest breakthroughs. A creditor might have a hardship program, a lower interest rate, a reduced payment arrangement, or a settlement offer available. You may not even need a third party to get relief.
A couple got an Amex interest rate reduced from 26% to 9.99%
Remember the couple we told you about at the beginning? They actually had FOUR American Express accounts with huge payments and high interest rates.
Once they started calling their creditors themselves, they were able to negotiate that 26% rate down to 9.99%! And because they had a budget system in place, they also got two and a half months ahead financially, which was especially helpful with their commission-based income.
A single mom called five times and received a 0% rate
Another client, a single mom and nurse, contacted one creditor five times in one day. She kept calmly asking about available help until she reached someone who could offer her a different option. Talk about persistent! She said, “I kept calling until I found someone that wanted to help me.” 😂 That creditor reduced her rate to 0% for the remaining life of that card’s balance.
Can we give this woman a round of applause?!
This is why we tell our clients not to give up after one phone call. Sometimes you need a different representative, a different day, or just a little more patience.
Would we love for you to get an amazing offer on the first call? Absolutely. But sometimes you have to be a little more stubborn than the credit card company. 😂
We’ve also seen a client negotiate 60% off an outstanding balance with a five-month payment plan. Again, individual offers depend on the account and circumstances. The lesson isn’t that every caller gets a deal. It’s that you may have options you haven’t asked about.
Now, we know what you’re thinking. “Okay, this sounds amazing, but what the heck do I SAY when I call?”
That’s exactly why we created our DIY Debt Relief Workbook.
It includes the scripts we teach our coaching clients, so you can stop researching debt consolidation companies and start finding out what your own creditors are willing to offer.
You make the calls. We’ve helped you prepare for them.
7. Will This Fix Why I Needed Credit Cards in the First Place?
We have coached women who consolidated credit card debt, paid off the original cards, and then built up new balances. Suddenly they had the consolidation loan and new credit card payments.
Think about the last few times you pulled out a credit card.
Was it really because you were out buying designer handbags? Or was it because the kids needed new cleats, club volleyball registration was due, Christmas rolled around, or you had a $300 hair appointment you completely forgot to plan for?
You’re making good money, but your budget isn’t accounting for everything your family actually spends money on.
And guess what? Christmas is still December 25th next year. Your kid is probably going to want to play volleyball again, too. (Just us? 👀)
If we don’t start planning for those expenses, you’re going to end up right back on those credit cards, no matter how you consolidated the old ones.
That’s why we teach a budget system instead of just a budget.
Our budget has five parts: income, debt, bills, spending, and savings. Separate your bills, everyday spending, and savings into a system that makes your money easier to manage. Then automate what you can.
Yes, you can budget for Christmas and get your nails done while paying off debt. We’re big believers in being bougie on a budget. The goal is to plan for what you want instead of putting it on a credit card and worrying about the payment later.
How to Make Your Own Debt Relief Plan
We’ve also put together a full guide on how to get out of debt without consolidation if you want to dig deeper into negotiating with creditors yourself.
Step 1: Get the full list of debts
Get your free credit reports from AnnualCreditReport.com and compare them with your current statements. List every creditor, balance, interest rate, minimum payment, and due date. Your statements are important because credit reports may not reflect the most current balance or arrangement.
Step 2: Build a budget that reflects real life
Before you decide how much extra you can put toward debt, plan for your actual household costs: bills, gas, groceries, regular spending, and savings buckets for things like Christmas, insurance, and children’s activities.
When those are accounted for, you’ll know what money is available for additional debt payments. If even the minimums don’t fit, that tells you where to focus the creditor conversations.
Step 3: Call your creditors
Set aside uninterrupted time. We tell clients to allow up to an hour per call so they aren’t rushed. Be calm, honest, and specific about what you can afford.
“Hi, I’m calling because I’m having trouble managing my credit card payments, and I want to find a way to pay off this account. Are there any hardship programs, reduced interest rates, or payment arrangements available? I’d like to understand the terms before agreeing to anything.”
Ask how long any rate reduction lasts, whether the account will be closed, how payments are reported, and whether fees apply. Write down the representative’s name, the date, and the details of the conversation. Ask for the offer in writing.
Just because you receive an offer on the phone doesn’t mean you have to accept it on the spot. Check the payment against your budget first.
Step 4: Choose a payoff order
You might use the debt snowball and start with the smallest balance. Or, after speaking to creditors, you may have a specific offer worth evaluating because you can realistically afford it.
For example, when you eliminate a debt with a $115 minimum payment, that frees up $115 per month you can redirect toward the next debt or another necessary priority. You can see your progress one payment at a time.
Not sure which debt to tackle first? We explain the different payoff methods in our guide on how to get out of debt without living on beans and rice.
Step 5: Set up a system so the progress sticks
Separate bills, spending, and savings. Automate transfers when practical, save for irregular expenses, and take a break from credit cards if using them has kept you stuck.
Remember that buy now, pay later is borrowing too. When a purchase doesn’t fit this month’s budget, consider saving for it instead of adding another payment.
What If You’ve Already Joined a Debt Relief Company?
Review your agreement before changing anything. Ask what fees you’ve already paid, whether creditors received payments, what funds are held for future settlements, and how cancellation works. You can also check directly on your account status with creditors, subject to any authorizations in place.
Don’t assume that canceling a program is automatically the right step. If you’re dealing with lawsuits, garnishment, or debts you cannot reasonably repay, reputable nonprofit credit counseling or legal help may be appropriate. Bankruptcy can also be a legitimate legal option in some circumstances; it shouldn’t be dismissed without understanding your situation.
You Can Start Taking Control of Your Debt
One client began with approximately $4,000 per month in debt minimum payments. She had tried asking creditors for help without getting very far. After studying the scripts in our DIY Debt Relief Workbook, she changed her approach to those calls and received reduced payments and 0% interest offers.
She later reported paying off $74,000 of debt in one year and another $54,000 the following year. Her results depended on her circumstances and aren’t a guarantee for anyone else. But stories like hers are exactly why we created this resource.
Ready to Make Those Phone Calls?
If the thought of calling your credit card companies makes you want to crawl under your desk, we get it.
What do you even say? Who do you ask for? What if they tell you no? What if they offer you something and you have no idea whether it’s a good deal?
That’s exactly why we created our DIY Debt Relief Workbook.
We’ve taken what we’ve learned helping our coaching clients negotiate with creditors and put it into a workbook with scripts, instructions, and a plan for what to do next.
You don’t have to make up what to say on the phone. We’ve already done that part for you!
Get the DIY Debt Relief Workbook and start making those calls.
Frequently Asked Questions About Debt Consolidation
Yes! You can call your credit card company directly and ask about hardship programs, lower interest rates, different payment arrangements, or possible settlements. Not every creditor will offer a deal, but you don’t need to hire a debt settlement company just to ask.
We don’t recommend it.
Here’s our biggest problem with debt consolidation: It doesn’t fix WHY you ended up in credit card debt in the first place.
We’ve coached women who consolidated their credit cards, felt like they finally had everything under control, and then ended up with a personal loan AND new credit card balances.
Now they have even more payments!
We’d rather help you negotiate with your creditors yourself, eliminate those monthly payments one by one, and build a budget system so you don’t end up right back where you started.
Ask whether another department handles hardship programs or when you might qualify for additional options. Take notes and consider following up. Remember our client who called five times? Persistence worked for her, although that won’t guarantee an offer for everyone. Don’t intentionally miss payments just to pressure a creditor into making a deal.
Written by Shana and Vanessa, Budget Besties, Master Financial Coaches. We have helped hundreds of people create budgets, organize their finances, and work toward paying off debt since 2019. This post is educational and is not individualized financial, legal, or tax advice. Budget Besties does not negotiate debt on behalf of clients.
