Running into financial problems is never any fun. Hopefully, it won't last long, either. One way to help you put an end to pressing bills (and possibly bill collectors) is to get a home equity loan. Consolidating your debts using a home equity loan is a great way to reduce your payments, get lower interest and even get some cash along with it. Here is how it works.

A home equity loan is the cash you can receive from the equity that has been built up over the years. This means that the longer you have lived in your house, and depending on what mortgage type you had, the more equity you have accumulated. You can easily calculate about how much equity you have in the house by subtracting the amount you still owe on your mortgage from the current value of your home. This gives you the total equity.

Go one more step and you will see how much you can actually get. Multiply the value of your home by .8, and then subtract your mortgage balance. This gives you the total amount of equity available to you - if you have good credit and have enough monthly income. Actually, the lender will decide the answer for you.

Now, add up all of your bills to find out how much of that equity you actually need to consolidate your debt. This is the amount you need to get yourself out of debt and back on your feet financially. One reason that a home equity loan works so well for debt consolidation is because of two things. The first advantage is the lower interest rate. If much of your debt is due to credit cards, then this most likely will reduce your rates considerably - helping you save money in interest each month.

A second benefit is that it will reduce your monthly payment amount because your debt is now stretched out over a longer time period - possibly up to about 15 years. It is recommended, however, that you try to keep it is short as possible in order to pay less interest.

Home equity loans are relatively easy to get. A couple of qualifications, however, will need to be met. There will be a need to have a reasonable credit score and sufficient income to handle the added debt. A home equity loan is a second mortgage and will add another payment. With debt consolidation, though, this new lower payment will replace all the other ones and make that same amount of debt easier to handle.

When you get a home equity loan, you will need to decide which kind you want. They can be obtained as either an adjustable rate mortgage or a fixed rate mortgage. This will help you to stay on top of the economy if you learn which type is more practical for your situation.

You can also get more of your equity, if you want, than what you will need for debt consolidation. All you need to do is to let the lender know just how much you want. Projects around the home such as renovations, additions, siding, etc., will bring you an increased home value, as well as being tax deductible.

Be sure to get several quotes before you sign on the dotted line. You can save more money by getting the lowest interest rates you possibly can. Be careful of the various fees, and be sure to compare them, too.