First off, you must have something of value to offer as collateral for this to be an option at all; most people use the equity of their home. This can be referred to as “debt transformation” you are not at all reducing your debt, but merely transforming it from a low-risk unsecured debt into a high-risk secured debt. Statistics have shown that a high percentage of people who obtain debt consolidation loans end up right back where they were in credit card debt within 5 years, but this time around there is an extra secured payment that must be made first, this situation can force many into bankruptcy.
There are also unsecured debt consolidation loans which require no collateral but most Americans that apply for this type of loan get denied because their current credit cards are maxed out. Even if you think your credit is good because you have never missed a payment the second most important part of your credit score is your debt to credit limit ratio, where if your debt exceeds 50% of your credit limit it's to high, in spite of the fact that your income is high enough to handle the payments you will be denied.
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