If you still have equity on your home, you may use that "equity" to borrow a home equity loan from a bank or other lenders.

Most people will get a standard mortgage loan when they first purchased a property. Subsequently they may want to buy something now but don't have the money. So they get a personal loan but lenders want security for their money. So they take a second or third mortgage on your property if there is still equity left. Now you have a home equity loan.

Home equity loan is often used to consolidate all your credit card, consumer card, car loan and other personal unsecured loans into one single loan. This is done because interest on a home equity loan is way lower than the interest rate on your cards.

Often you are looking at 7 or 8 percent versus 20 to 25 percent. It is three to four times cheaper on a home equity loan.

Also it is easier on your finance if you have to take care of only one monthly payment rather than having to make 10 monthly payments to 10 different lenders.

It makes sense to have a home equity loan to replace all your other expensive loans because the interest you save can be used to pay down your debt principal.

However you should be financially disciplined and not run into more debt by again getting into credit card or other expensive consumer loans. If you do so you will get deeper into debt but this time because your home equity loan is secured by the collateral of your home, you may end up loosing your home.

Lenders love home equity loan because they hold your home as security. So again make the lenders compete for your business and obtain the best rate and best deal.

Remember on a 25-year $100,000.00 fixed rate mortgage, a half percent drop in interest rate will save you $9,173.82 in interest charges over the life of the loan.

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source: CMHC

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