Pros and Cons: Home Equity Loans for Debt Consolidation

You've been making your mortgage payments for years, plus your home has increased in value over time, so you have plenty of equity in your home to consolidate debt into one monthly payment — most likely at a lower interest rate.  Home Equity Loans for debt consolidation might be an excellent option for some people, but not for everyone. Here are some pros and cons to consider before using a home equity loan to pay off your debt.


  • Lower interest rate - The interest rate on a home equity loan is much lower than rates on personal loans and credit cards.
  • One payment – A home equity loan allows you to have one easy payment, instead of several payments to several lenders each month.
  • Lower total monthly payment – With a lower interest rate and only one loan payment, your total loan payments might be less than your current combined individual loan payments. This could save you money.



  • Foreclosure - With your house as collateral, you risk foreclosure if you can't pay. If you fall behind on your payments, you could lose your home.
  • Real estate market downturn - If your home's value drops, you could wind up owing more than it's worth.
  • Spending habits - Home equity loans are only helpful if you can change your spending habits that caused your debt level in the first place. If you use a home equity to consolidate your debt but continue to use your credit cards, you are only making your debt situation worse.


Other options to consolidate debt

  • Personal loans – A personal loan is an unsecured loan with a fixed payment for a specified period. Personal loan interest rates are generally higher than home equity loans, since your home does not secure the loan.
  • Credit card balance transfers – If you have good credit, a 0% or other low balance transfer offer could be an inexpensive option – if you can pay off your consolidated debt before the no or low-interest period ends.
  • Debt management and budgeting – This is the best strategy. You can develop a long-term plan to pay off your existing debt and develop a monthly budget to ensure you live within your means, without the need for credit cards and other loans.

If a home equity loan is a good option for you to consolidate your debt, Texell's Home Loan Heroes are here to help. You can get more information and check rates on, and when you are ready to get approved, our online process is the best in the business. If you have questions, we are happy to help at 888.922.3001.


Learn more about Home Equity Loans