I've never been interested in looking into debt consolidation companies. I think part of it has to do with the fact that I like to be in control of my finances. Handing off my debt to a consolidation company just seems odd to me. It's hard to explain.
But with the onset of people to people lending via Prosper, I think it is a great way for people to take control of their debt on their own terms. With my Prosper experience, I had $3,500 sitting on a credit card at 13.99%. Thanks to Prosper, that interest rate has been reduced to 9.9%. PLUS, I am fixed into paying it in three years or less.
If my situation was different and I had multiple credit cards that I wanted to consolidate, I would have used Prosper for that purpose. The personal aspect of Prosper can possibly help you find people willing to take a chance of giving you a loan, especially if you have less than perfect credit or your debt to income ratio is high.
If you decide to use Prosper strictly for debt consolidation, here are some things to keep in mind:
1.) States have set maximum interest rates for loans, and some states have a maximum rate under 10%. If you have low credit, that can hamper the ability for your loan request to be funded.
2.) When you do create a listing, your debt to income ratio will include your current debt AND the new debt incurred with the Prosper loan. Make sure you include in your listing that the loan will be used to pay off current debt so your debt to income ratio will not actually be that high. To help ease the minds of lenders, I'd suggest adding up all of your current monthly debt payments of the balances you will be consolidating. Then, note your new monthly payment with the Prosper loan. If the Prosper loan payment is higher (which it probably will be due to having to pay it in three years) note how you can afford the extra money needed for your monthly payments.
3.) Start your loan listing with the highest rate you would feel comfortable with paying. For me, I started my listing almost 2% less than my credit card interest rate. If my loan ended with that interest rate, it may not have been a drastic reduction, but there's a sense of pride with paying off the credit card and paying interest to regular people.
4.) Do not state in your listing that you want the loan to get rid of debt. I have seen some Borrowers state this, but with getting a loan from Prosper you are not getting rid of debt. Your Prosper loan is as valid of a debt as your credit cards or other loans. You are merely shifting your debt around to make your situation better. Showing Lenders that you have a handle on your finances and have the correct attitude with paying it off can help get bids.
5.) Do not opt to have automatic funding. If you choose automatic funding, the rate that you have listed will be the rate you will receive. There is no chance for Lenders to bid your rate down because your listing ends when you are funded 100%. In my case, there was a flurry of activity near the end due to last minute bids. Let the market (and human nature) bid your rate down. For debt consolidation and debt reduction, every little bit helps!
6.) Check out my list of Tips for Listing a Loan on Prosper for some general tips.
Good luck!! If you have questions, feel free to leave a comment and ask :)
Index of My Borrowing Experience with Prosper