Debt Consolidation companies negotiate the buy out of your debt with your multiple creditors (i.e. multiple credit cards, past due utilities, auto payments, etc.). Often they are able to pay off debtors for lessened amounts by negotiating a reduction in interest and late fees.

Debt Consolidation companies then charge you one payment a month to encompass the total amount they had to pay out to your creditors. The amount you end up owing the Debt Consolidation company will be similar to the total amount of your previous bills however your monthly payment may be dramatically less due to the combining of amounts and adjusted interest rate.