13. Debt consolidation
People who find themselves with burdensome debt payments each month, because
they have overextended their finances with credit cards, can get some relief by getting a
home equity credit line. The home equity credit line will have a lower interest rate, and
the interest may be tax deductible. Those needing greater relief can apply for a second
mortgage. Second mortgage rates will probably be slightly lower than for home equity
credit lines and the payback period can be much longer. When people take a second mortgage
to consolidate revolving credit debt, the relief can be significant. Of coarse, the
tradeoff is that they are giving up equity in their property.
Homeowners who need the maximum in debt consolidation should consider
refinancing their primary mortgage, especially if they can get a lower interest rate.
There are more details on this in the section on refinancing in this tutorial.