by Christy Bieber | May 21, 2021
Many or all of the products here are from our partners. We may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Although you can use a home equity loan to consolidate debt, the big question is whether you should.
If you owe money to a lot of different creditors, you might be interested in consolidating it.
Debt consolidation involves taking out a new loan, hopefully with a lower interest rate, to help you pay off your current debt.
If you're approved for your new loan, you'll use the proceeds to pay back every creditor you currently owe money to. Instead of having many loans with multiple different monthly payments and interest rates, you will only have your new loan to pay.
For those who are consolidating debt, the big question is what type of new loan you'll take out. While you have many different options, a home equity loan is a popular choice. But before you borrow against your home, you need to consider the pros and cons of consolidating debt by using this type of loan.
Secure access to The Ascent's free guide that reveals how to get the lowest mortgage rate for your new home purchase or when refinancing. Rates are still at multi-decade lows so take action today to avoid missing out.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
With a home equity loan, your house acts as collateral. The amount you can borrow will depend on a home appraisal. The biggest benefits of consolidating debt with a home equity loan include:
While these benefits can help make a home equity loan seem attractive, there are also some disadvantages.
For many people, these downsides outweigh the upsides. When that happens, personal loans or balance transfer credit cards end up being the better option for consolidating debt. If you're considering taking out a loan, be sure to consider each new loan type carefully so you can make a fully-informed choice about what's best for you.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
The Ascent's in-house mortgages expert recommends this company to find a low rate - and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn't influence our opinions of products, we do receive compensation from partners whose offers appear here. We're on your side, always. See The Ascent's full advertiser disclosure here.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.