So many consumers are taking on additional debt to ease existing credit issues. Their goal is to consolidate numerous higher-interest debts into one, easier-to-handle less expensive plan. There are debt-consolidation loans, balance transfers to a zero-percent credit card and home equity loans and home equity lines of credit.

Folks who take out a home equity loan or other type of loan to pay off credit cards end up repeating the process with the same (if not higher) debt load within two or three years. We humans are creatures of habit. I personally don’t really like the debt consolidation theory. This approach can become a habit. So many households in our country today are consolidating or using the equities in their homes. They’re repeating the process every few years. This gets you out of your immediate situation. It doesn’t help you in the end.

Debt consolidation feeds upon the tendencies that got you in trouble in the first place. By taking on yet another creditor, you’re adding the proverbial fuel to the fire. In this case, it’s your money that’s burning. Plus, if you’ve taken on so much debt that you’re looking for more as a solution, chances are you won’t qualify for the very low interest rates you see advertised. Those generally go to people with stellar credit ratings.

Many lenders are making it very easy to refinance your debt. Some will let you borrow more than the full, fair value of your home. If you suddenly have a legitimate reason to sell, after having done this, you’ll be in a very awkward position. You’ll be upside-down in your house. If you do sell, you’ll owe more than its value.

There are good reasons to borrow from your equity. A good reason is home improvement. (The improvement should raise the value of the house in an equal or greater amount than the cost of the improvement. If not, reconsider the expense.) Another good reason is to fund a college education for you or your children.

To use equity for a trip to the Virgin Islands or Alaska or to pay off credit card debt or other debts is not a good idea. When the Joneses do this, their spending is out of control. They still have the credit cards and the accounts open. They’re still living beyond their means. They have to go back to the well, the equity in the house, in a few years and do it again. They’re making their financial world worse each time.

By simply facing the situation and going through the long process of paying off the debt, as it exists, the Joneses learn lessons. These lessons will serve them and their families well. By living beyond their means, assisted with the debt relief program associated with the equity in their homes, they’re spending the work credits their invested dollars produced.

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