Debts accumulated over time can push borrowers into a very difficult situation.

There is nothing wrong with borrowing provided the borrower has the capacity to repay. But when you keep borrowing to repay someone else, sometimes far beyond your means, you get stuck in what is called a debt trap.

Creditors start pressing for repayments and debtors increasingly resort to a cycle of reckless borrowing.

A good way to get out of this situation is to opt for debt consolidation.

Break the vicious cycle

It is easy to visualize a scenario where a debtor gets stuck in a trap.

When you do not have enough cash to meet existing obligations, you just go and borrow to make up for the shortfall.

When the payment on the new debt becomes due, you go and get a new loan.

The problem is that as you pay an interest on each loan, the situation keeps getting worse, until you are neck deep in debt.

The only way to get out of the situation is to break this vicious cycle of new debts to repay old ones through one decisive move.

Consolidate debt

You can consolidate all your debts so that you get the advantage of the best possible interest rate that you can avail given your past credit history.

An average person may not even be aware that there are avenues open to him/her to reduce the interest burden. It is here that a reputed debt consolidation agency can help you out.

Once you have presented your debt position to the agency along with that of your current assets and earnings, the agency will come up with the best solution to make your debt more manageable.

Typically, it involves using your home or some other asset as collateral to take a new loan that will be used to repay all of your existing debts. The new loan comes at a low interest rate, especially if it uses an asset, usually a house, as collateral.

This reduces lenders' risk and they would be willing to pass on the benefit to you in terms of lower interest rates.

The rate that you'll get on this loan will be significantly lower than unsecured loans like credit card debt or personal loans.

Consolidating your debt can thus result in huge savings because of lower interest cost.

Do it now

The important thing about high interest debt is that the longer you stay in it, the more difficult your situation becomes.

Credit card interest can pile up rapidly before you even realize how much trouble you are in.

It is prudent to act fast the moment you get a hint that things could be getting out of your hands.

Look for a good debt consolidation agency in your area and start planning your way out of your financial problems.