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For starters let us identify what a secured debt consolidation loan is. This is when you use the equity in your home, which is a loan secured by your home to pay off your other debts usually credit cards and other unsecured debts. At first this may look like a simple and easy alternative to manage a debt situation that has spiraled way out of control. You merely get the debt consolidation loan enabling you to pay all your debts and then only have one monthly payment, instead of issuing out multiple monthly payments to all your various creditors throughout the the course of the month.

Now let's take this predicament and put it under the magnifying glass. First, this is known as 'debt transformation' a method of moving debt from one place to another. In reality what you did was transfer your lower risk unsecured debts into higher risk debt that is now secured by your house. This is where the major problem occurs, because if you run into any financial problems again that could cause you to start missing payments you run the risk of having the bank foreclose on your house. Many people don't even think about this nightmare scenario happening when they take this approach to their debt problem. People think they have found an answer to their debt situation by using the equity in their homes to pay off debts, but in reality are positioning themselves for a much bigger problem.

People pay off their cards with 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 debtors is a subconscious addiction, credit card junkies, and the disheartenting fact is many people are in denial about this. Data has shown that after five years 80% of people who use this route of credit card debt relief find themselves stuck back in debt with credit cards once again except the second around they have an additional secured payment against their house and run the risk of filing for bankruptcy or possibly getting their home foreclosed.

At this point you take a peek over your shoulder only to discover a unbearable mountain of credit card debt behind you only to speculate how in the world you got there again. The majority of instances it began from that sole credit card you kept around just in case. After not to long the credit card companies view you as a higher credit risk and raise your interest rate up to 30% or more. Upon the interest rate being increased your minimums double and possibly even triple.

Now you find yourself trapped back in the middle of the ruthless credit card treadmill, however you have a another mortgage that must take precedence 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 ratio is far too high to get any sort of loan, before you know it filing for bankruptcy seems like the easiest road out of this situation. However bankruptcy will leave a very damaging scare on your credit history.

I have spoke with thousands of Americans over the last 19 years who have done just what I described above. Everyone has the same exact thing to say. They thought they were going to be able to control the situation and did not have the foresight to see themselves ever getting back deep into credit card debt again and wished they had someone who would of advised against the move they made back when they did it.

For most Americans who were cornered in this predicament the best decision at that time would have been to go the route of debt settlement. Even though with settlement the credit score will be lowered it is the fastest way to become debt free while at the same time saving a vast amount of money on what is owed.