Debt consolidation is a process of restructuring your existing debt with your creditors. Debt consolidation is not a loan, but a way to lower your monthly payments and lower (sometimes even eliminating) the interest, late fees & over the limit fees you are currently paying.

Consolidate debt with home equity as security

Such a debt consolidation home equity loan is a secured loan where your property will be security against the loan. The lender will have a lien on your house until you pay off the home equity loan in full. While you'll continue to own your home as loan collateral, the debt consolidation loan will keep the creditors away and keep you out of bankruptcy. You'll be able to save a little, because the single monthly payment will be considerably less than the sum of the ones you had before.

The first thing to do once you've obtained your debt consolidation loan is to look over your use of your credit cards, so that you don't use any of them in times of temptation, thereby increasing your debt. This will definitely put you right back in hot water.

Tax deduction and home equity loan consolidation

Another possible advantage is that interest you pay on your equity debt consolidation loan may be tax deductible. Normally, if you add your first mortgage to a new debt consolidation loan, and the total does not exceed 100% of the appraised value of your property, the interest you pay will be fully deductible. Your tax consultant can advise you on the matter, and it's always a good idea to check with him or her.