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This can be one of the best options or one of the worst. Of course you have to be able to get a loan to begin with. While there are different types of consolidation loans available, the most common is the home equity line of credit.

The pitfalls are, you’ll have all of your credit cards paid off. Hey, paying off my credit cards is a good thing, what are you talking about here? Paying off your credit cards is a great thing, that is, if you cut them up and never use them again. If you take the opportunity to use your credit cards for just one or two small things then you’re in big, big trouble. You’ve just increased your debt and your monthly payments. And you've started back down the slippery path to the land of the maxed-out credit card. This means that you're now in a worse position than before you consolidated. Don't do it!

Unless you’re sure you’ve found the self-control to avoid those nasty credit cards forever, run as far away from this path as possible. For those who have found control this can be a wonderful path - just be sure you know what you’re doing before you start.

0% Transfers

Ah those balance transfer offers! Well they can be a good deal, but they can be dangerous, see above just in case you've already forgotten.

If you're paying 12%, 18%, 22%, etc. on a loan and you can get a new credit card that has a 0% interest rate you, I hate to say it, should. Well at least you should consider it. The math is pretty simple. You'll pay off a loan at 0% a lot faster than one at 18%. And if you have the self-discipline to not use either the new or the old card for anything else, ever, then transferring the high interest-rate balance to a zero interest rate card is good money management.

But you knew that there was a warning coming, and here it is. First of all be sure you read and understand the credit offering. That’s because with most, if not all of them, the zero percent interest rate is good only for the amount that is transferred and then only for a short period. Well that's no big deal right? Well, guess again. The amount purchased will be separated from your balance transfer amount so that interest can be applied. And here's the fun part, all payments you make will go to pay off the 0% balance transfer part of your balance. The interest-charging part remains unpaid, and merrily compounding for months and months. Oh but the fun doesn't stop there. If you have a busy life that includes things like working, taking care of your health, taking care of your family, or car maintenance, home remodeling, vacationing, or if you get an occasional illness like the flu it, is possible that you could create a mortal sin, at least in the eyes of your credit card company. Yes, I mean you could miss a payment. And then oops, there goes the 0% interest deal. Too bad.

But let's look of the good side of the bad side. If you quit using the old card and you wound up getting the zero percent interest rate deal for a while and then had you interest rate go back up to where it was at least you got some relief for a while.

But, again there's the bad side of the bad side. If you used the old card, or put additional charges on the new card and lost your 0% interest, you're deeper in debt.

Lines of Credit

A line of credit, other than one secured by an asset, is another popular choice for debt consolidation loans. To get one you're going to need to have good credit and an established relationship with a lending institution. Of course having a large amount of assets that could be liquidated if necessary would help too.

With a line of credit you're not going to get a 0% loan but you probably won't get the catches that come along with it either. So if you're one of the few that can get one, and you can avoid creating additional new debts, have at it.

Borrowing Against Assets - Home Loan Refinancing

The big daddy of the debt consolidation loans is the home mortgage refinancing loan. Some of them will allow you to pull out money to pay off bills, or use it for whatever purpose you'd like and some will give you a line of credit that you can use in the future if you need to. It's it a good idea? I'm sure you know the answer by now. As long as you don't use it as an excuse to create new debt it sure is. You'll probably wind up with some tax benefits because you're now paying off a home loan instead of a credit card. But I'm not a tax expert so check with one before you make your decision based on this.

The big downside to using a home mortgage refinancing to pay off credit card debt is that if you default on your credit card payments you wind up with a bad credit report and maybe a lawsuit. Don't pay your mortgage and you wind up losing your house.

All in all, for most people using your equity is a smart move. Just be sure to continue your smart thinking by making sure that you have a plan to live within your means in place before you take the money.

The Ultimate Solution

No matter which path you take the ultimate solution to debt is found by taking control of your life, and your money. Just figuring out where the money goes isn't enough. You must have internal control over your emotions, thoughts, and actions. By doing this you will gain the ultimate control that will allow you to build the life of your dreams.

The ultimate solution to debt lies in creating and living a debt-free and prosperous life. I invite you to start you inner journey to wealth by reading The Art of Prosperity.


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Debt Calculator

See how long it will take for your debt to get paid off with one of these four options. We have listed a standard debt amount as a default on the debt calculator. You will need to enter your current personal or business debt amount below to see what your debt payoff amounts will reflect.

What's Best For You: Minimum Payments?

Debt Consolidation?

Credit Counseling? Debt Settlement?
Total Unsecured Debt $30,000.00 $30,000.00 $30,000.00 $30,000.00
Months To
Get Out Of Debt
430 60 60 36
Interest Rate 18.9 % 12 % 10-12% Ave None
Total Interest Paid $49,978.53 $10,040.01 $21,300.00 None
$900.00 $667.33 $855.00 $458.33
Total Cost
To Be Debt Free
$79,978.53 $40,040.01 $51,300.00 $16,500.00
Monthly Payments   Months To Get Out Of Debt   Total Cost To Be Debt Free
Minimum Payments Debt Consolidation Credit Counseling Debt Settlement
Enter Your Debt Information Here:
Your Total
Unsecured Debt:
Your Average
Interest Rate:
Months To
Be Debt Free:


PLEASE NOTE: This calculator gives you an estimate of how much it will cost you to get out of debt, how long it will take and how much your monthly payment may be with the different options to pay off your debt. Keep in mind "Minimum Payments" assumes you NEVER make any further purchases on your credit cards and the credit card companies NEVER raise the interest rate on your cards in the future from the rate calculated above. The "Debt Consolidation Loan" example is usually only possible when taking out an "equity line of credit" or "second mortgage", which involves securing your unsecured debt with your home. This is a very risky option for most people because the home could be foreclosed if you cannot make the payments.