There could be many reasons people get into debt. Losing a job, sickness or accidents can abruptly push you into sudden expenses. Hence, you are bound to keep on borrowing in such circumstances. But, before you are aware of it, you are deep down in debt, owing money to several Banks, friends, relatives and credit companies. Store bills and credit card bills keep on ascending and situation has gone out of control.


Debt consolidation can be termed as replacing a number of debts with one single debt at a single interest rate. For some people, consolidating debt may be a respite, for others it may be a curse. It is based on persons' situation. Debt consolidation can be only way to get yourself out of debt trap particularly if you are under immense pressure.


Some merits of debt consolidation are:


• It consolidates all your debts into one low monthly payment

• Reduces your debt drastically

• Helps to get you out of debt fast

• Helps to rebuild your credit ratings



Demerits of debt consolidation:


• Lasts longer

• You end up paying more over the life of the loan, monthly payment could be less but the true cost of the loan is often more

• Lenders require to confirm your payment potential which is a sore exercise



The interest rates on personal debt consolidation loans are usually high. It is difficult to find debt consolidation loan at a lower interest rate if your debts are high. Lenders target people in vulnerable situations with poor credit ratings by offering fancied deals that appear to be ultimate solution.


Personal debt consolidation loans can be either secured or unsecured. Unsecured loans require no security; only the paying potential is assessed, while secured loans require property essentially as collateral. Upon default of the loan payment in a secured loan, the lender has a legal right to repossess any of the items listed as collateral for the loan. Debt consolidation can be very good and at the same time a disaster, depending upon how you handle it.