The biggest disadvantage to using your home equity to pay down other debt is this: if you cannot repay your new loan, you could lose your home to a foreclosure.Even if you sell your home, you’ve reduced the profit you can make from the sale by the amount of debt you’ve now included in your mortgage.If you have several credit card accounts with a balance, you could benefit from consolidating your debt by reducing your interest rate and having only one bill to pay.In addition to reducing the interest you pay, mortgage interest is typically tax deductible, while credit card interest is not.Consolidating multiple loans means you'll have a single payment each month for that combined debt but it may not reduce or pay your debt off sooner.By understanding how consolidating your debt benefits you, you'll be in a better position to decide if it is the right option for you.student loan is subject to completion of a loan application/consumer credit agreement, verification of application information, credit qualification, and a benefit to borrower determination.You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Debt is a major problem for many American households — especially those that have credit card debt in addition to mortgages, auto loans and student loans. Many cardholders pay higher rates on higher balances.
Debt consolidation allows borrowers to roll multiple old debts into a single new one.
This has been great for homeowners who want to lower their monthly mortgage payment by refinancing to a lower rate.
But it can also help you get rid of high-interest credit card debt.
The 30-year mortgage rate hit 3.31% in November 2012, the lowest rate in history.
Fast forward to March 31, 2016, and it inched up only slightly, to 3.71%.