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First what is your standard debt consolidation loan? This is when you utilize an asset of value that can be used as collateral to obtain a loan, in the majority of situations people use the equity in their home. Initially this may look like a simple and easy alternative to manage a debt situation that has spiraled way out of control. You merely obtain the debt consolidation loan too pay off all your debts and then only have one monthly payment, instead of making multiple payments to different creditors throughout the the course of the month.

But let's take a more knowledgeable look at this situation. First, this should be called 'debt transformation' a way of transferring debt from one place to another. In reality what you did was transform your lower risk unsecured debts into high risk debt that is now secured by your house. This is where the major problem occurs, because if you run into financial difficulties again they can take your house away. The majority of people don't even think about this nightmare scenario happening when they take this approach to their debt problem. Debtors think they resolved their situation by not having any more credit card debt, but in reality are positioning themselves for a much more severe problem.

Debtors pay off their cards through the debt consolidation loan secured by their home and now carry a balance of zero on these cards. However people still leave one card open with the highest credit limit just in case. Using credit cards (plastic) for many people is a subconscious addiction, credit card junkies, and the sad fact is most Americans are in denial about this. Stats have revealed that after five years 80% of people who utilize this method of credit card debt relief end up with the same credit card debt problems and now a higher mortgage payment.

At this point you take a peek over your shoulder only to be shocked with a huge mountain of credit card debt behind you only to wonder how in the world you got there again. The majority of the time it started from that lone credit card you kept around just in case. Shortly thereafter the credit card companies envision you as a high credit risk and increase your APR up to 30% or more. Once the interest rate has been increased your minimums double and possibly even triple.

At this point you are trapped back in the thick of the dreaded credit card treadmill, however you have a second mortgage that must take priority over the credit card debt or you will lose your home. In this situation now you do not have any equity to get another debt consolidation loan and your debt to credit limit ratio is too high to get any sort of loan, before you know it filing for bankruptcy seems like the easiest way out of this situation. However bankruptcy will mark a very deep scare on your credit report.

I have spoken with thousands of consumers over the past 16 years who did just what I described above. Everyone has the same exact thing to say. They thought they were going to be able to handle it and did'nt foresee themselves ever getting back into credit card debt again and wished that somebody would have told them not to attain the debt consolidation loan.

For many who were cornered in this predicament the best choice at that time would have been to go the route of debt settlement. Even though through settlement the credit score will be lowered it is the quickest method to becoming debt free while at the same time saving money.

Steve Bis is a debt analyst and research assistant with the US Consumer Advocate, which primarily practices in credit card debt relief.