Bills and debt are a routine part of life. But when the expenses far exceed the income then a debt trap is created. There are the monthly rent, gas, water and other expenses. Then there are the credit card bills, student loans etc.In addition are the expenses that could spiral out of hand and within no time run into bad debt.

The most immediate consequence of a bad debt situation is to file for bankruptcy. Though that would provide immediate relief from being harassed by creditors, it means that you’ve defaulted with the repayment of debt. The law does offer some relief to the creditors by allowing them to demand part payment over a period of time. But to spare oneself from what can be a very complicated legal filing, the alternative could be to procure a debt consolidation loan.

How can a debt consolidation loan protect one from going bankrupt?

Debt consolidation is the process by which all the outstanding payments that are due from a person are collated into a single large amount and is then divided into monthly installments. This consolidation and the procedure of repaying to the different creditors are outsourced to professionals known as debt consolidators. Their services are available both in person as well as over the net.

A debt consolidation institution or an individual debt consolidator will come to an agreement with you regarding your debt outstanding and offer to bail you out of the situation. After deciding on the rates of repayment to the debt consolidation institution or the individual, these professionals will begin hard negotiations with each of your creditors. With waving the red flag of you going bankrupt as the final negotiating ace, they will haggle, cajole and persuade the varied creditors to either accept lower rate of interests or to allow part payment of the dues or to pay a partial amount and hope to write off the rest of the credit etc. Once all these rate structures are in place, the bewildered debtor will only have to issue a single check to the debt consolidation company or the debt consolidator. They will in turn distribute the outstanding payments to each of the creditors month after month. Thus a debt consolidation loan is like putting all your debts into one basket and totaling them and repaying with small sustainable payments.

Though the debt consolidation loan could give you immediate relief from having to pay the several debtors on time, you will be caught up with a new problem.You will now have to pay out this single loan over a very long time frame and at higher rate of interest. The debt consolidation loan will be more expensive in the long run though it provides the swiftest and the best solution under the circumstances.

You will have to ensure that you go to a registered debt consolidation agency so that you are not unnecessarily taken advantage of given your vulnerable state of mind.