Learning how to use your home to consolidate debt is a strategy that allows you to take out a fresh loan and use it to pay off all outstanding loans. Such loans can include credit card debts, car loans and student loans among others. Debt consolidation only becomes a feasible alternative if you are able to get a lower interest rate that makes your new payment lower than the sum of the combined payments that you were making up till now. You can also do this by extending the term of the loan so that it affords you immediate relief in paying bills. But you need to make sure that such an extended term does not increase the total interest you have to pay over the extended period.

If you have a home on which you are making mortgage payments and have done so far without default, you can use the equity that has already been generated to get a loan to consolidate the debt that you have from other sources like credit cards, car loans etc.  This will then help you to lower your monthly debt repayments, pay off credit card dues that attract very high interest and mainly consolidate all debts into a single one so that in future you are making only a single payment. This can also get you some tax benefits and help to reduce the rate of interest that you have been paying up to date. Home mortgage interest is tax deductible even though this will be limited to the value of the equity that you have from your mortgage.

While this home equity loan can help you to pay off your debts and reduce monthly payments, you are however putting your home at risk. Whatever equity that you had after repaying your mortgage is now also at risk, and in case you do miss out on payments in future, you will be in the situation where you lose your  entire property  even in case of filing for bankruptcy.

Before you decide on using your home to go in for debt consolidation, you need to make sure that the equity you have in the property is substantially lower than the total debt that you have accumulated. Some lenders prefer that you limit this to 80 percent of the value of the property, while others may not mind going up to 125 percent of the property value. This however depends on the property market and the present market is only showing a decline in values that can work against the amount you can borrow for debt consolidation.

One of the first things that you need to do once you take on a home equity loan to consolidate debt is to see that you curtail all future spending by completely eliminating the use of credit cards and refraining totally from acquiring any new debts through new purchases. This financial discipline will enable you to concentrate the resources that you have to repay the consolidated debt, and unless you do this successfully you stand to lose your home and get into still trickier situations.