Consider Using a HELOC for Consolidating Mortgage Loans

Loan consolidation is easily the number one reason that most people take out a HELOC loan. In fact, about 40% of home equity debt is taken out for the purpose of loan consolidation.

Strictly from a numbers standpoint, the case for using a HELOC loan to consolidate higher rate credit card or consumer debt is a strong one. With a single, easy to obtain loan you can simplify your finacial life, enjoy lower interest rates, reap the benefit of tax-deductible interest, and gain significantly greater repayment flexibility. So what’s the problem?

In a word - temptation. For too many borrowers the flexibility and freedom that a HELOC loan consolidation provides is too much of a good thing. Rather than using the opportunity to get their debt under control, they often end up further in debt because of uncontrolled spending - only this time, the debt is secured by their homestead.

There are many superb articles that cover the benefits and pitfalls of loan consolidation with a HELOC. Here are two that are particularly useful:

- Ready to Consolidate That Debt?

- Bankrate’s Guide to Consolidating Your Debt. This resource also includes very useful debt consolidation calculators.

Suffice it to say here that using a HELOC loan to consolidate other debts is a viable and prudent strategy for the financially responsible person.