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Debt consolidation loans are a common choice and are often touted as an easy way to get out from under the burden of credit card debt. It sounds good, doesn't it? Take out an equity loan on your home, and instead of paying those cards at 20% interest, you could have one easy payment with as little as 6% in interest. There are three major flaws in this plan though.

The first is that it does not address the issues that got you into debt in the first place. You used your credit cards, and you kept charging and building up your balance until it was out of your control. So if you get a loan to pay off those accounts, you'll suddenly find yourself with a whole new source of spending power - all your old credit cards will be empty and just waiting for you to use them!

At first, you may just think you'll just use your card this once, for something you feel is important. Then you may justify some other purchase, which may be valid. Maybe your pet needs veterinary care or your child needs some dental work. The next thing you know, your balances will begin building and you'll not only have maxed out cards, but you now have to make payments to your consolidation loan as well. A study showed that 2/3 of those who borrowed against their home equity to pay off credit cards had run up more credit card debt within two years!

You may think you can use willpower to resist the call of the cards, but it's not about willpower. It's about a change in the way you think about and use money and credit, and getting a loan simply won't teach you what you need to know.

Even if you are one of the few who has "learned their lesson" and you close your credit cards, cut them up, and refuse to apply for more credit, there is yet another problem with getting a consolidation loan.

You will still owe the same amount you did on your credit cards, and only a small portion of your payments will go to repay your balance. Although you've traded a high interest rate for a low one, your loan may span 15 or even 30 years! To get an idea of how this works, look at your mortgage statement. Until the last few years of a mortgage, almost the entire payment goes toward interest, and only a small amount chips away at your balance. Your equity or consolidation loan will work in much the same way. Instead of getting those cards paid off in a few years, you'll be paying off your loan for many years to come.

This is a tactic widely used by car dealers. They have you pay attention to how much your monthly payment will be, not how much you are actually paying for the car - leaving you with a seven year loan on a car that likely won't last as long as the loan. With a consolidation loan, you may be paying less per month than you would if you paid your cards, but you'll be paying much more in the long run.

This leads to the next flaw in a loan. Currently, your credit cards are unsecured loans, meaning that no property or assets act as collateral on the debt. So if you default on a credit card debt, your creditor can harass you. They can send threatening letters. They can get a judgment against you, which is basically a legal confirmation that you owe the debt. In extreme cases and in some states, they can garnish your wages once they get a judgment, which can add some strain to your life. But they can't take anything away from you.

The risks involved with unsecured debts are nothing compared to the possibility of losing your home. If you pay off your credit cards with a consolidation loan or equity line, you have effectively traded your low-risk unsecured debt for high-risk secured debt! This means that if you default on your loan, they can have a lien put against your home and in some cases even force the sale of your property to repay the loan.

Some consumers have been misled to believe that a home equity debt consolidation loan might be a good idea due to the deductible interest. The IRS is advising consumers that they are cracking down on these deductions and that the interest paid on home equity loans for more than the market value of your home, where such a loan is used to repay unsecured consumer debt, is not deductible.

The bottom line: these loans are usually NOT a viable solution to get out of debt. If you are still considering a consolidation loan as an option, please do careful research before jumping into a commitment you may regret for a long time.