Borrowing to pay Debt

Going deeper into debt may seem like the last thing you would want to do.But taking out a loan to pay down credit card debt may make sense.Why?Often,you can borrow money at a less expensive interest rate than you are currently paying to the credit card company.It will also simplify your bill paying,and if you're being nagged by collection agencies,it will get them off your back.One of the most popular borrowing options for this purpose is what is called a debt consolidation loan.
Here is how it works: A bank agrees to loan you a lump sum of money,which you use to pay off all your credit card debt.You then pay back the loan(with interest) in agreed-upon monthly installments.You'll save if the interest rate that the bank is charging is lower than the various rates you are paying on your credit cards.You will also save money if you get a loan with a fixed interest rate rather than an adjustable one.
To consolidate your debts,you can take out a personal loan from your bank.(The bank will typically ask for collateral that's an asset,such as your home or a car,to back up the loan.
Another option is to borrow against the equity in your house by taking out a second mortgage or an equity line of credit.A second mortage works much like a first mortgage.You borrow a fixed amount of money which you will receive in a lump sum,using your home as collateral.An equity line of credit,on the other hand,works more like a credit card.Upon approval,you are granted a maximum credit line that you draw on over a certain period of time.Both of these home equity options give you extra cash and let you pay it back at a rate lower than most consumer loans.In addition,the interest paid on these types of loans is tax deductible.The interest paid on credit card debt is not.
Please keep in mind that if you CAN'T CONTROL your credit card spending do not consolidate credit card bills.Armed with a fistful of zero balances,you are likely to just run up those credit card balances and that consolidation loan.Instead try consider your accounts altogether.