← Back to Education CenterLower payment does not mean less debt
Using Home Equity for Debt Consolidation
Home equity may sometimes be used to consolidate higher-rate debt, but the trade-offs deserve careful review.
01
Possible benefit
A lower blended interest rate or longer repayment schedule can reduce the monthly obligation in some situations.
02
Important trade-off
Consolidation does not eliminate debt. Extending repayment can increase total finance charges, and unsecured debt can become debt secured by the home.
03
Avoid repeating the cycle
A consolidation strategy is more effective when it is paired with a plan to control new borrowing and improve cash flow.