Debt consolidation government loan programs are out there, but they are not available to everyone. A program is the Federal Family Education Loan, also known as the FFEL program. One is the Direct Loan Program. Another is the Direct Loan Program. Each of these will include student loans, but work uniquely. With these loans, debts are consolidated into one loan with easy repayment terms. You usually will only be able to qualify for such a loan if you have a student loan under the Department of Education.

Government backed student loans can be consolidated. If you have a debt through a student loan, you can get a loan that will pay off all of your existing school loans with a new loan that you will repay monthly from that point on. These student loan consolidation programs often do not allow you to apply any credit card debt or other debts to the program.

Debt consolidation government loans are not your only option for consolidation.
You will want to look for a substantially lower interest rate than you currently are being charged. You also want a company that offers good terms that will reduce the overall monthly payment you have to make.

Luckily, programs like direct Federal student loan are available to help anyone struggling to make ends meet or those that are hoping for a faster way out of their debt. Whenever considering any of these loans, do your homework and know if it is cost effective to switch lenders then apply to consolidate your student debt by taking debt consolidation government loans.

But what is the reason behind this? One can safely say that there are many factors that play a role here. Irresponsibility is just one of them and not the primary factor as one might assume.

Consolidating debt can attract bids. The aim is that all debts, and combining them with a single payment. Rather than pay 10 creditors, 10 interest rates, which received only the payment of a fixed rate. Sounds like a miracle to avoid the stigma of bankruptcy fix, but there are things to watch.

FEES. If you have an offer to consolidate your debt onto one credit card, be sure to read the fine print. Most of these offers carry fees of 3% – 6% of the total balance transferred. So if you are looking to put $10,000 from various cards onto one at a low rate, the fees alone would cost $300 – $600. If you are looking to work with a Credit Counselor investigate exactly how they will be paid. It might not be an “out of pocket” expense, but often the fees are rolled into the consolidation loan. The debt consolidation company can also take it’s fees off the top of your new monthly payment, leaving less each month to go to the actual debt. Know the costs before committing.

INTEREST RATES. Are you actually paying a lower rate on the consolidation? List out the fees and interest rates on all your existing accounts to determine the total payments you now make. Compare that amount with a potential consolidation payment and interest rate to ensure actual savings.

TAXES. The biggest hidden cost in a debt consolidation is taxes. Most people are unaware that the difference between the amount you owe and any amount forgiven by a creditor is taxable as ordinary income. For example, if you owe $10,000 and have that amount negotiated down to $6,000, you would be liable for taxes on the forgiven amount of $4,000. The IRS refers to this amount as the “Discharge of Indebtedness” (DOI) and you are likely to receive a 1099 from the debtor for that difference.

Credit Counselors and debt consolidation loans can offer to lower your monthly payments for you, but it is worth your time (and bottom line) to see if you can do this yourself. The goal is lower payments and interest rates, so call each and every one of your creditors and explain your specific income situation.

A lot of different companies may offer you a bad credit debt consolidation loan with a small fee. But some of theme may cost you much more than you are going to save. You need to choose a reliable company with a good history and testimonials. In order to do so, it is recommended to do some research and learn about the company you are going to cooperate with. Internet will help you in this work.

Marguerite of San Antonio TX (01/09/09)
I gave them over 3800.00 to setup and to pay the bills to keep from filling bankruptcy They never paid a thing to any of my creditors just kept my money

let me behind in bills alot of late charges. Called them they would say they are working on it.

Kevin of Toledo OH (10/03/08)
I used this company from late 1999 until early this year. Never once did I have a problem or late charge. Interest rates were reduced to amazing levels, thankfully as I was suffering from extensive debt after a seperation. My income was always good and I never failed to have the money available to Ameridebt. I would highly recommend this company if it still existed. All they say they will do is automate the payment and reduce your interest. No miracles period. And if you dont get the money to them dont expect them to pay your bills for you.

Terry of Punta Gorda FL (09/04/08)
Utilized as a debt consolidation. Turned out that was not the service they were providing.

Paid Ameridebt thousands of dollars. I am currently going through foreclosure on my home as well as bankruptcy.

Lisa of East Islip NY (08/22/08)
My telephone rang. When I answered there was an automatic message stating that this collection angency was calling, had tried to reach me many times, and that I had better return their call. I decided it was a mistaken call and I’d straighten it out so that my phone would stop ringing.

When I called them, they switched me to a credit person who had my first and last name, told me this was a pre-legal call, and that action was going to be taken on my account tomorrow. I asked what this was in reference to and they said I owed $6,200 on a Ford Escort–which I never boght. I told her as much, that there was a mistake, and she called me a liar. I then hung up on her.

I would like action taken against Ameridebt and my name and number taken off of any lists they may have conjured up.

Josephine of Bronx NY (07/10/08)
I was 19 and a half and in debt, because of school and other situations, I decided to go on Ameridebt. I thought and everything seemed legitimate so I kept making payments to them from 1999 until the year of 2002-2003. I would call them up they said they were making payments, expect in my case they told me I was done and my bills were paid off.

I just found out yesterday I have a levy on my account, and i wasn’t send a thing. Ameridebt didn’t pay off my bill, they lied, and I am on disability with a fixed income. I would like to know where the heck my money went one, two, I was mostly too sick to question a thing.

What is a person supposed to do when they paid the money in full and finds out, things weren’t really ever paid off, and I am in worse trouble now, than I was before this stupid Ameridebt. I am so stressed out now, I have to take anti-psychotics yesterday just to calm down.

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Example #1
Let’s look at an example of debt consolidation. Let’s say you’re facing $20,000 in credit-card debt, You turn to a debt consolidation company, attracted by its nonprofit status. You are stunned when they pocket your entire first payment as a “voluntary contribution.” You’re also surprised to learn that the company is collecting nearly 10% of your payments as “continuing contributions”. Of course this is disclosed in the “fine print” of the contract, but you figured you could trust a “non-profit” company.

Besides, the representative never disclosed the fees as he applied pressure for you to sign quickly. The fees also put you behind with your creditors, triggering late fees. By now you understand the truth: They’re not doing credit counseling, they’re just passing through your money and skimming some off the top for themselves. That doesn’t sound like a non-profit company to you.

Example #2
Here’s another example, this one involving debt settlement. Let’s say you have racked up $20,000 in unsecured credit card debts. You owe $10,000 to one credit card company, $7,000 to another one, and $3,000 to a third one. You agree to contract for a five year debt settlement plan where you pay $250 a month to the settlement company.

Sounds good, right? After all, $250 a month for five years is only $15,000, so you’re saving $5,000 and you’ll be debt-free in just five years, right?

Let’s examine this arrangement a bit closer. The admin fee will cost you $750 up front. Your first three monthly payments go towards that admin fee and nothing gets put into your trust account until your fourth monthly payment has been paid. The settlement company takes the first $50 of your $250 payment every month as the service fee. That means that only $200 a month is actually being added to your trust account.

Most debt settlement companies will claim to be able to settle your debt for about 1/2 of what you actually owe, so let’s use the middle credit card debt as an example:

If you owe $7,000 on the account and the creditor agrees to accept $3,500 as payment in full, it will take you 8 months at $200 per month to have accrued enough cash in your trust account to pay off just that one credit card bill. But remember, your first three payments to the debt settlement company only paid the $750 admin fee. That means your first credit card isn’t really settled until 11 months after you started sending them money! So what is the problem? It’s really very simple – Your creditor won’t agree to accept half of your actual debt amount in settlement unless, or until, that amount can be paid in full. Otherwise, they’ll expect you to make your normal monthly payments.

Conclusion
Debt consolidation companies, even the “non-profits”, are in the business to make money. Debt consolidation is nothing more than a “con” because you think you’ve done something about the debt problem. The debt is still there, as are the habits that caused it – you just moved it! You can’t borrow your way out of debt. You can’t get out of a hole by digging out the bottom. Real debt help is not quick or easy.

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• “DEBT RELIEF IS JUST A CLICK AWAY!”
• “CUT YOUR MINIMUM MONTHLY PAYMENTS BY 50% OR MORE!”
• “SLASH YOUR INTEREST RATES DOWN TO ZERO!”

Three bad debt-consolidation moves:

1) The Hard-Money Loan

Updated from moneycentral.msn.com