How is debt consolidation different than a loan?
You may have seen debt consolidation loans advertised and they may look like a good idea at first. With these loans, you receive a bank loan against your property to use this money to pay off high interest credit cards. Typically, you are required to use the equity from your home as collateral. This can create a problem because most people who are deep in debt do not have home equity and the people that do are concerned about taking on more debt. In order to reduce your debt, you need less credit, not more. Increasing debt by mortgaging your house is typically financial suicide. Many people report that refinancing with a consolidation loan or a second mortgage pushed them over the financial brink. Under these circumstances, the loan or mortgage you obtain (if you qualify) will have a high interest rate. Although you will appear to be making progress, you will only be digging yourself deeper in debt. A common myth is that debt consolidation loans are tax deductible. This is only partial
