Scam or not

You asked about debt consolidation which is completely different than debt settlement. The way debt consolidation works is you take a bunch of smaller loans and wrap them together into one big loan i.e. consolidate your debt. Generally the loan is either secured by adding to the mortgage on your home or unsecured through a larger limit credit card. You will get a better rate and a tax break if you consolidate to a home mortgage but it erodes the equity of your home. I prefer not to take unsecured debt and move it to a secured debt through a HELOC or similar but using this method is not a scam. You do need to be careful of the terms of the loan though. Do not sign up for a high interest rate / high fee HELOC. Conventional mortgages are going for around 4% right now. A HELOC should only be a few percentage points higher.

The way Debt Settlement works is you default on your unsecured debt and then at a later date you attempt to settle that debt for a lesser amount. I would not recommend doing this unless you do not have the funds to pay your debts because you lost a job or something similar. This will destroy your credit rating and make it very difficult to obtain a conventional mortgage or auto loan. You can settle your debts on your own or you can hire a company to do it for you. I believe the scams you are referring to are involved in debt settlement because many companies exist that perform this service but a lot of them do not do it well and will steal your money. Be very careful who you pick if you decide to use a company. Personally I recommend doing it yourself if you can handle dealing with a few scum bag collectors.

Click on the following link to know more about debt consolidation: http://www.debtconsolidationcare.com/credit-card.html