Debt consolidation is when you use one large loan to pay off multiple, smaller loans, presumably at a lower interest rate. Borrowers can often save money because the single monthly payment on their new loan is often lower than the total of all the monthly payments of their consolidated debts. Homeowners can also potentially save money by consolidating high interest, non-tax deductible debt with a new home loan because the interest rates on mortgages are typically much lower than interest rates on consumer debt (ie. credit card interest rates can be as high as 24%), and it may be possible to deduct mortgage interest from your income tax returns.

Utilizing a mortgage to consolidate high interest consumer debt such as credit cards can be a very good option because mortgage interest can be tax deductible, and mortgage rates are usually lower than the rates associated with consumer debt vehicles.

Since you are making just one payment, you also are less likely to be late on payments, reducing the impacts of late fees and penalties...and possibly even paying your debts off faster.