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Debt Consolidation can be defined as obtaining one loan in order to pay off another loan. It is quite a popular method of releasing debt because of its lower interest rates comparing with other available loan schemes but the considering time maybe higher. With the current economy people are compelled to obtain loans but eventually fall into the burden of many debts. Debt consolidation helps to lessen that over burden into a single loan at a lower interest rate for a longer period of time.
More often debt consolidation is being done by gaining a secured loan against a fixed asset which can be a land, house or car. Converting an unsecured debt into a secured debt can put the asset at risk considering the steep decline of value in lands and houses at present. Ultimately it might cause you to loose your asset in the end.
Debt consolidation is also possible through personal loans but it demands a high interest rate as it presented without a security by the lender. But a person with over burdens will not be able to handle this type of commitment to join their debts.
At present debt consolidation is much possible through a debt management plan or a debt settlement program where a debt settlement company involves in negotiating with the creditors and settling off a percentage of dues for you and organizes a settlement plan.
However many media reports criticize the use of consolidation loans. Although it seems appealing and tempting to settle for a lower monthly interest rate within an extended period, you actually end up paying double the amount at the end of the given term. You may feel like you have got rid of the dues but you have actually got into a never-ending burden over your head where the debt settlement company is able to make long-term profits through you.
Debt consolidation happens to be treating the symptoms but not the cause of the problem. The main solution to over come these situations are by changing your habits and cutting down on the expenses and starting to save more. Committing your self according to a game plan and knowing where your operating costs are running to will give you a bigger picture on your expenditure. Therefore the best solution for debt recovery is to live on less than you make.
