Home equity loans or home equity lines of credit are another form of consolidation sought by some people, as the interest on this type of loan is deductible for borrowers taxpayers who itemize their deductions.
Why do people want to consolidate their credit card debts, student loans, and medical debt all into one payment?
Because oftentimes they think it is a magic wand of sorts – that it will cause all their debt problems to disappear.
The couple had refinanced six years before, but when mortgage rates dropped to historic lows in May, they saw an opportunity to eliminate their credit card debt by refinancing their home and rolling $25,000 of credit card debt into the loan.
Thanks to an excellent credit rating and an appraisal valuing the house at $345,000 -- four times what they owed on it -- Ray and Jo Ann managed to lock in a 30-year fixed mortgage interest rate of 4.8 percent, two points lower than before.
There are several ways consumers can lump debts into a single payment.