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Debt trap is like a labyrinth – it is very hard to come up out of it. Once you go a victim of a high interest loan, you maintain on taking out new loans to refund the old ones. It is often quite hard to maintain path of so many loans and this may lead to bankruptcy. If you believe that you will not be able to refund your loan, then you can declare yourself bankrupt. Once you are declared bankrupt, you will be free from all your debt obligations. However, bankruptcy stays in the credit score for seven to 10 years. Therefore, you must seek and refund your loans instead of declaring yourself bankrupt.

One manner to avoid bankruptcy is to help a debt consolidation loan. Debt consolidation assists you maintain path of your debt. It compounds all the high rate loans into one low rate loan. A low interest rate will allow you to pay small monthly installments. Debt consolidation loans are both secured and unsecured. You must travel for a secured debt consolidation loan since it carries a low rate of interest. An unsecured debt consolidation loan is a high rate loan and so it overcomes the very intent of consolidating high rate loans into a low rate debt consolidation loan.

There are respective types of debt consolidation loans. A homeowner’s debt consolidation loan is secured against a house. It is a type of secured loan and offers all the benefits of a secured loan such as as low rate of interest, flexible repayment terms, small monthly payments, etc. Inch lawsuit of a default in the repayment of a homeowner’s debt consolidation loan, the house against which the loan is given may be repossessed by the lender. Another type of debt consolidation loan is a personal debt consolidation loan. Just like any other personal loan, a personal debt consolidation loan can be secured as well unsecured. Another manner to consolidate your debt is to transfer your unpaid credit card balance to a new credit card which offers a low rate of interest. Find a credit card issuer that makes not inquire you to pay transfer fees.