Debt Consolidation

This involves combining all your other loans into a new master loan. Mortgage brokers offer this service to their customers where a consumer pays-off their credit cards and other loans with a new higher mortgage on their home. The debt still remains and has been transferred from one company to another. With home values declining or not going up as rapidly as they used to, this bail-out loan based on home appreciation just isnt an option nowadays. Other factors to consider are closing costs, points and the fact that you may loose your home is you over-mortgage it with payments you can not afford long term.

According to the FTC, debt consolidation is defined as: "You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. Remember that these loans require you to put up your home as collateral (if you own a home). If you can't make the payments - or if your payments are late - you could lose your home. On the other hand, if you do not own a home you are not eligible for this type of solution."