As a result of the Bankruptcy Abuse and Consumer Protection Act which was passed in early 2005, filing for bankruptcy has become difficult, time consuming and expensive. However, because of the tax deduction benefits and the fact that housing prices have skyrocketed in recent years, the home equity loan (second mortgage) has become an increasingly popular way for consumers to borrow money for debt consolidation purposes, especially with the continued increases in interest rates on credit cards.

The average household now has nearly $10,000 in credit card debt, and borrowing against the equity of your house can provide much-needed relief with lower payments, as well as a tax deduction that could equal 100% of the interest you pay on your loansomething that credit card and other non-mortgage debts cant offer. Second mortgage loans can also be used to refinance high rate loans like auto loans and bad credit student loans, as well as variable rate loans. Second mortgages are fixed mortgage rate loans that generally have lower rates than many other loans, and financial planning is easier because the payments remain predictable.

The main thing to remember is that second mortgages are secured loans. The Federal Trade Commission warns, "Remember that these loans require you to put up your home as collateral. If you cant make the payments--or if your payments are late--you could lose your home."

While second mortgages are also popular for home improvements, home construction, buying a vacation home, and for freeing up funds for investments or continuing education, it's probably to first work on getting your debts under control. Then, when you are in a better financial position, you may consider mortgage refinancing to consolidate your first and second mortgage loans and free up cash for other purposes.