With the global economic downturn, the life of most US citizens has become immensely difficult in the past few years. Though the nation has been claiming to emerge out of the hard times lately, it will take quite some to put the life of these citizens back on track. To meet their essentials, they have resorted to extreme cost cutting steps like selling their houses and moving into smaller ones, selling spare automobiles and making do with just the necessary ones, etc.Desperate to maintain their lifestyle, a majority of them are caught in the trap of debt. Payday loans and other seemingly short-term cash assistance have landed them in a long term vicious circle of debt. A boon for such people is the debt consolidation service that has emerged as a means of respite from the searing cash crunch. These services put forth tall claims of pulling their customers out of their financial hardship. Let’s find out why and to what extent they are successful.Defining The TermLet us first have a clear and comprehensive understanding of what the term debt consolidation means. To state it in clearer terms, consolidation of various debts by the borrower entails asking for a major loan at a flat rate of interest to pay off the many smaller ones at varying interest rates. This step is intended to relieve the borrower of tracking the differing payments of his many loans at different rates and payment dates. Managing all the payments gets extremely difficult at most times.Consolidation of one’s debts brings all of them under one large roof, simplifying the process of controlling one’s short and long term liabilities. In other words, debt consolidation accomplishes the objective of putting an individual’s varied due balances under one big head at better payment terms as compared what he had earlier. People believe that adopting this strategy will reduce the debtor’s monthly payments to a significant extent. However, risks as well as tradeoffs must be taken into account while deciding on such services. Otherwise, one may end up losing more than what one gains.Risks InvolvedPrograms meant for debt consolidation are aimed at improving a person’s overall debt situation. Though initiated with the noble intention of offloading a debtor, it may end up increasing the costs and loan charges. Take, for instance, the case of those people who utilize their houses to get a second mortgage loan to consolidate their previous loans. Such people stand a chance of losing their homes by adopting such a strategy. This is the prime reason behind the newspaper and media reports on the auction of a borrower’s property that we come across almost daily. These individuals had, in fact, failed to pay their debts off. But becoming panicky is no solution to this trouble. Smart and well-calculated liability consolidation steps can save you from big time trouble at a later stage.Both secured and unsecured debt consolidation plans are on offer for needy debtors. It is obvious that the interest rate would be low in the former plans as compared to that in the latter ones. It is therefore in the best interests of the borrower to reach a decision after careful consideration.