Choose the right debt-elimination tool for you

There are four basic types of debt services. Before you take action to eliminate your high-interest balances, determine which is best for you.

The first and most reputable and reliable is a non-profit debt counseling service. Check with your local government (the department of housing and urban development is a good place to start in cities). They should be able to recommend someone who can look at your finances and offer solutions that you will have to implement yourself. The services are often free and agents can sometimes find grant assistance for other bills, such as your rent, gas, food or even your mortgage.

The next option is a service that promises to help you manage your debt by negotiating with creditors and making payments for you. The negotiations can save you money, but you'll likely end up paying the debt management company as much as or more than you saved.

A third choice is debt consolidation. This is a new loan that pays off all of your old loans. It's not a bad idea in theory. If you can get a lower-interest loan from a bank you trust, it's a good way to go. Check with your bank about getting a personal loan or putting your car up as collateral. The problem is with the companies that offer consolidation loans. They often charge exorbitant fees and don't save you much in the long run, especially if they focus on lowering your monthly payments rather than your overall debt.

The final type of debt relief, the type you hear about most often on the radio, is the worst type. Companies that promise to eliminate or settle your debts, often take huge fees and then collect money from your for months without paying on your accounts, so they can offer a lump-sum settlement later. Even if it works, the damage done to your credit score after months of nonpayment on accounts will leave you crippled.

Getting rid of debt is a lot like getting rid of unwanted weight and fat. There are lots of products that offer to do it for you with no effort on your part. But the only solution that actually works, generally requires your personal involvement.

-Amanda H. Miller