Debt consolidation seems like a no-brainer. You replace high-interest credit card debt--issued by companies that can seemingly change the rate and terms of your loan at will--with a better loan. The new loan lets you lower the payment by stretching the balance over a longer term, the rate is often much lower, the interest may be tax-deductable, and the terms you sign up for are the terms you get. A fixed rate stays fixed, an adjustable rate changes according to the rules. No bait. No switch. So, what's not to like?

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The reason that debt consolidation interest rates are so much lower than credit card rates is that the loan is secured. By YOUR home. If you end up filing for bankruptcy, you can tell your credit card companies to pound sand and there's nothing they can do. But if you have paid them off with a home equity loan, you're still on the hook for the money. You have changed your credit card debt from unsecured to secured--and secured debt can't be blown off, except by allowing the lender to foreclose and evict you from your home.

Before opting for debt consolidation, look at your entire financial picture. How secure is your job? Do you have medical insurance? How is your family situation? Because the top causes of bankruptcy are job loss, medical problems, and divorce. And if you are just an illness, accident, or indescretion away from bankruptcy, then debt consolidation may not be for you.

So, if there's a decent chance that you could end up in bankruptcy any time soon, protecting your home equity is more important than protecting your unsecured creditors. If your debt consolidation loan doesn't get your total payments (housing, autos, loans) down to less than 45% of your gross pay, then there's a good chance that you won't be able to make your payments as agreed. If you don't have a secure job, or health insurance, or your marriage is on the rocks, now is NOT the time to be using up your equity on debt consolidation. Now is the time for credit counseling (and possibly family counseling). Once your job, medical, and family situations are reasonably secure, it's safer to take advantage of a debt consolidation loan. Then, it IS a no-brainer.