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Second, you may be able to set up a consolidation loan that lets you pay off your debt over a longer time than your current creditors will allow, so you can make smaller payments each month.
That's particularly helpful if you can combine it with a lower interest rate as well. Basically, you borrow a single, lump sum of cash that's used to pay off all your other debts.
Home equity loans come in two major types a standard home equity loan and a home equity line of credit (HELOC).
The standard home equity loan is the most commonly used for debt consolidation because you borrow a single lump sum of cash, whatever you need to pay off your debts, and then pay it off over a period of years at a fixed interest rate.
There are some situations though, where a HELOC might be a more attractive option.
A HELOC sets a certain amount you can borrow, called a line of credit, and you can draw upon at any time and in any amounts you wish.
However, these cash advances can also get you into trouble, because they usually reset to a fairly high rate once the no-interest period expires - often 16 to 18 percent.
They also typically charge an up-front fee of several percent of the amount borrowed, so you need to take that into account as well. One of the best, and most popular ways to consolidate your debt is through a home equity loan.
And because it's a type of mortgage, you may be able to deduct the interest payments on your federal tax return.
Many lenders specifically offer loans for this purpose.
Of course, this approach requires that you have fairly good credit - if your FICO credit score is in the mid-600s or lower, you may have trouble getting such a loan from a bank or credit union.
As you may know, many credit card lenders freely offer these to their customers with good credit, in the form of blank checks the borrower is invited to use as they wish.
What's attractive about these cash advances is that they often offer 0 percent interest for a limited time, often 9 to 18 months, so they can be useful if you're able to pay off the whole debt that quickly.First, you may be able to get a lower interest rate on your consolidation loan than you were paying on your various other debts.