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On Monday we looked at some advantages to refinancing your mortgage to consolidate debt.  However, just as there are two sides of a coin, there are also two sides of debt consolidation using your mortgage.  Let's take a look at some of those:

Disadvantages of Debt Consolidation

· Your home is at risk. When you secure your debt with a mortgage or home equity loan, you risk foreclosure if you fall behind on your payments..

· Higher cost of the debt. While extending your debt over a longer period of time can lower your payments, it also increases the cost you pay for the debt.

· You may need a co-signer. If your credit score has already been hurt by late debt payments, you may not without someone who’s willing to co-sign the loan for you.

· Is Debt Consolidation the Answer?

· Using debt consolidation is a viable option if you can do it at a low cost, without risking your assets or the assets of others.

· Taking a close look at the advantages and disadvantages of debt consolidation puts you in a better position to decide whether to consolidate your debts. Realize that while debt consolidation can make it easier to pay off your debt, it doesn’t solve actually solve your debt problem.

· Many people in debt have overextended themselves, lived without money for emergencies, and used debt to fund a lifestyle they couldn’t afford. Debt consolidation just masks the effects of these problems. It doesn't actually solve them. You must fix the habits that led you to debt in the first place. Otherwise, you can easily find yourself back in the same situation.

· After consolidation, make sure you replace your bad spending habits with good ones that will discourage debt in the future.