If you owe a lot of money, more than you are able to pay, and the interest payments are killing you, then looking into a debt consolidation program may be a way out. But you need to be careful. If you get into the wrong program, you could end up in worse condition than when you started.

It is a common misconception that a non -profit debt consolidation company will not charge you a fee. Even if they are a legitimate non-profit, one hundred percent of their income is from their customers, you. They do not operate simply out of the goodness of their heart. They expect to earn a living.

Many of these "non-profit" companies are telemarketers who use high pressure tactics to get you to sign up for debt management plans. These plans generate millions of dollars for them. Their executives often have six-figure salaries. But they are still able to maintain their non-profit status because they operate in the public's interest.

Some will ask for a "voluntary contribution" which they say they will disburse among your creditors, but then they don't. They pocket the money instead.

This problem has become so bad that some states have taken action. Virginia passes the Nonprofit Credit Counseling Act to impose stricter licensing standards and requiring a bond of up to $350,000 for the licensees. Applicants must submit a copy of their Debt Management Plan Agreement, their accreditation certificate and independent evidence to show their credit counselors are qualified to provide debt management assistance.

You may be told that you can transfer all your credit card debt into one new card with a low interest rate or even 0% APR. Yes, you can. But find out how long that interest rate will last. It will probably be for a limited time and that time will probably not be for long. Then the interest rate will go up, a lot.

Think about it. Who would be willing to give you a loan if you're already in financial trouble and your credit score is in the gutter? No reputable bank or lending institution will give you a loan. That leaves, you guesses it, non-reputable ones. Crooked debt consolidation companies may promise you an easy to get loan with a low interest rate, but that rate will probably end up being quite high, as much as 22% APR.

With a lump sum settlement offer, the company may require you to either deposit a sum of money or make automatic withdrawals into a special savings account. When you have saved enough, they will go to your creditors and offer them a lump sum in exchange for them writing off the difference. Sounds reasonable. Well…

You're told to stop paying all your bills and put that money into this savings account. Really? What are the creditors going to do if you stop paying anything at all? Your credit score will go even lower, if that is possible. And you may also be subject to harassing calls from credit collectors.

On top of that, the company is probably going to take a hefty fee out of the money you do save.

If it sounds too good to be true, it is.