Debt consolidation ~ Pros and cons of paying debt with a mortgage

Because of the new bankruptcy laws, people are looking for alternate ways to consolidate their bills, credit card consolidation solutions as well as proven loan consolidation solutions. One of the most popular methods for homeowners to consolidate their debts is represented by debt consolidation loans by taking out a home equity loan (second mortgage), by mortgage refinancing (the replacement of an existing mortgage with a new mortgage) or by taking out a home equity line of credit (HELOC). But, you have to take into consideration several pros and cons before signing:

Pros
1. The interest rates for refinanced first mortgages and home equity loan (second mortgage) are usually lower than the most credit card interest rates.
2. The interest paid to a mortgage could be used as a tax write-off, but it may be also limited in certain situations.
3. If you have to make only one payment, this makes things easier because you know how much must be paid monthly, and there is only one creditor to deal with. Sometimes, if you have more than one payment to do, things may become complicated.

Cons
1. It usually takes little bit longer to pay a debt consolidation. Even the interest rates are lower, you have to pay it off 10 to 30 years.
2. If you can't continue your monthly payment until the end of the period, the lender has the right to foreclose and take your home because the loan is secured by your home.
3. There are various examples when people really ended up in more debt than they were before. Chris Vitales is the general manager of Cambridge Credit Corporation, a non-profit counselling agency based in Agawam. He mentioned that “70% of Americans who take out a home equity loan to pay off credit cards end up with the same debt load within 2 years.”