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If you refinance your debt via a HELOC or Home Equity Loan, your debt is now secured. That means your house is tied to your debt, and if you cannot make your payments, you could lose your house. On the other hand, debt consolidation involves taking debt from one or more sources and transferring it into one area. The goal of consolidating your debt is to lower your total payments, and hopefully lower your interest rates. Either of these options are great, but each carries some level of risk.
The Home Equity Line of Credit and Home Equity Loan, although tax deductible, are anchored by your house. There is always the possibility of losing your home if you call behind on your payments. Recent studies have shown that the majority of individuals who pay off their credit cards via a Home Equity Line of Credit or Home Equity Loan, end up charging their credit cards right back up. The best way to avoid this is by cutting up and getting rid of all but one credit card for emergencies. Keep a low credit limit on this card so that it is easy to payoff if it is ever used.