Many of us have more than one type of debt. Mortgages, personal loans and high interest credit card are all typical debts that most Americans have. Sometimes, in order to pay off one debt, it is necessary to borrow from someone. This, of course, creates another debt. The solution? Debt consolidation.

If you are a homeowner, you may be able to get a home equity loan to consolidate your debt into one payment. This will allow you to pay all of your credit cards and consumer loans with one affordable, low-interest monthly payment.

A home equity loan for debt consolidation is a secured loan in which your property is held as security against the loan. This gives the lender a lien on your home until the home equity loan is paid in full. This will allow you to continue to own your house as loan collateral and keep creditors away, as well as keep you from filing for bankruptcy. You also may be able to save just a little because your monthly payment will be somewhat less than the sum of the debts you owed prior to consolidation.

You will want to use extra care to not go back to using your credit cards or personal loans to pay for things that you cannot afford. You will not want to end up in this predicament again in the future.

Another advantage to using a home equity loan to consolidate your debt is that the loan may be tax deductible. If you add the first mortgage and the new consolidation loan and the total does not exceed 100% of the appraised value of the property you own, the interest on the loan is fully deductible. You can consult your tax advisor to find out the specifics for your particular situation.

There are four good ways to consolidate your debt. The first method is to get a low interest home equity loan. These loans are secured with your property, which lessens the chance that you will default on the loan and allows lenders to offer you lower interest rates. You could also choose to cash out the equity in your home by refinancing or applying for a line of credit or second mortgage. While it can cost thousands in upfront fees to refinance your home, lenders can offer you overall lower payments. Often people will choose a line of credit or second mortgage because they typically don’t cost anything or are less than a couple of hundred dollars to open. Most people, however, choose the home equity loan, because the rates are lower.

The second way to consolidate is to get a low interest credit card account. By shopping around, you should easily be able to find a company that offers a 0% interest rate when transferring balances. Generally, these offers are introductory, so rates will most likely jump up in six months to a year. In the meantime, you can take advantage of the 0% interest and pay down your debt while the rate is low. There are some risks involved in transferring balances, so be sure you read the terms prior to opening a new credit card account in order to be aware of any fees involved when making a transfer.

A third good option is a personal loan. Offered through various financial lenders, this type of debt consolidation loan can help reduce your monthly payments. Rates will be higher because the loans are not secured, but they are still considerably less than the rate you’ll pay on a credit card.

Fourth, shop the various loan rates. Always be sure to research the rates, no matter what type of loan you’re looking into. You will likely save thousands of dollars by comparing the different lenders and types of loans they offer. This does not have to be a painful process; most lenders post their rates online so you can access them easily. Just be sure to read the terms beforehand so you won’t get stuck paying a lot of unnecessary fees.

When you have a list of lenders, you’ll want to determine which lender has the best consolidation loan that will fit your needs. All loans vary in interest rate length amount loaned and type of interest rate (adjustable or fixed). The rate of interest and which loan program you’ll qualify for are dependent on your income, credit and equity.

The next step is to complete a loan application for the institution you have chosen and supply all the requested documents. You will also need to submit copies of your credit card and loan statements that you intend to pay off. Completion of your loan process should take approximately three to four weeks.

Some warnings and tips: Your lender will likely require your credit cards and personal loans be paid off through escrow, meaning that when you close the loan and you have gotten your new consolidated loan, all your old balances will get paid off. The interest you pay on a loan secured by real property, such as your home, is deductible but the loan balance(s) cannot exceed the value of your property. Keep in mind: the purpose of getting a loan consolidation is to reduce the overall amount of your monthly payments and interest. The interest that you pay on a personal loan or credit card is not tax deductible.

If you own a home, a debt consolidation home equity loan may be the right option for you. Borrowing from your home equity allows you to tap into the equity you’ve built up in your home. Equity is the difference between the sum for which you can sell your home and any claims that are currently held against it.

This type of loan is often used for making improvements to your home purchasing a car or consolidating debt. There are two reasons a home equity loan might be a good way to go. First, the interest rates are usually some of the lowest a borrower will find and second, the interest that you’ll pay on the loan is typically tax deductible. Keep in mind, however, that a lender can take possession of your home if you don’t repay this type of loan. For this reason, some decide not to borrow against the equity they’ve built up in their homes, and take out less risky personal loans.

You need to be sure that you shop around for the best rates and terms for any type of consolidation loan you choose. The best thing would be to go with the lowest interest rate. And be sure that you get a monthly payment that fits well within your budget and that you’ll be able to pay off the debt within a reasonable amount of time.

It is tempting to continue spending once you’ve taken the loan and paid off your current credit card and loan balances, but the last thing you should do is rack up more debt that you’ll be unable to pay off. If you can’t keep up with your payments, you could lose your home or have to file for bankruptcy. This will stay on your record for at least the next seven years, rendering you an unfit borrower when you want to purchase a car or take a loan for any other reason.

Another benefit of this solution is that your credit doesn’t take nearly as bad a hit or keep your credit score poor for years to come. Having one easy payment can free up time and resources that is better spent on financial planning, allowing you to achieve the stability you would like to have. Lenders benefit from this scenario as well as they are given the surety of knowing they will be paid in full.

Debt consolidation loans are not just for those with good credit. People who are struggling with bad credit ratings can be helped as well. The company providing the consolidation loan will try to help improve your credit by using a number of different maneuvers. As a result, debt consolidation loans often encourage borrowers to get themselves back on track to raise their credit score.

You’ll want to keep in mind that while the loan rates on a consolidation loan are lower, they are stretched out over a longer period of time. So, even though the payments are more affordable, the total repayment will be considerably more. You should carefully consider the payback plan that is best for you. You will also want to remember that the loan is secured with your assets, usually your home, so should you default on the loan, the lender would retain the asset in lieu of payment.