Most credit repair/debt consolidation companies will take your money and trash your credit. They hold your monthly payment and wait till everything is 3 months past due. Then negotiate low settlement under threat that you will file bankruptcy. Some of the major credit card companies refuse to play and just sue you.

Forget about the 401k loan. Very bad idea for so many reasons. You need to just bite the bullet and stop spending more than you make. Stop using the credit cards.

Make a strict budget. Eliminate ALL the extras — eating out, cell phone, new clothes, premium cable and internet, etc. Take every penny you can squeeze out of that budget and put it on the highest interest rate credit card, while making minimum payments on the rest. When the highest rate card is paid off, move to the next till they are all paid in full.

Find ways to bring in more cash. Have a garage sale, collect alum cans, get a second job — pizza delivery has flexible hours. Throw the extra money at those credit cards.

If you really work at it, you can pay all that off within 3 years. Not only will you be out of debt, but you will learn some very good financial management skills.

Be careful…debt consolidators often will deliberately allow your accounts to default to put them into a position to negotiate settlements in the 50% range…..This can work….but it will exact a terrible price in terms of ruined credit….Also, as the accounts go past due…you’ll get flooded with collection call. Some creditors might balk at settlement offers and decide to sue….

Haven’t gone that route myself, but there are other options. Try prosper, or any other peer-to-peer lending site if you can’t get a consolidation loan. Also, see if you qualify for membership at any local credit union. A lot of them are open to all individuals in a particular county for instance. They are a lot more free to give discretionary loans in a tough credit environment.

You are right not to want to borrow from your 401k, as ultimately, you will pay it off with taxed dollars, meaning you will have paid taxes twice on part of your nest egg, when you are taxed at withdrawal. As a last resort, however, the interest rate may be lower than anything else you can find, and you are usually paying it to yourself, which should not hurt your 401k balance too badly.

Once you are repaid, try not to fall in the same credit trap