Drowning in debt? Home equity loans are one of the most popular ways to clean up personal debt while lowering monthly payments. When you take out a home equity loan, you borrow against the equity in your house. The loan is secured by a mortgage lien. There are two primary advantages of home equity loans: the interest paid may be tax-deductible, and the interest rate is often just a fraction of that paid on a typical credit card account. Both of these factors can add up to significant savings for borrower.

Homeowners often use the funds from their home equity loans for debt consolidation, home improvements, or other big-ticket purchases. Loan offers can come from many sources: from local banks, through direct mail, and via the Internet. With so many options, choosing the right loan and the right lender can be a difficult decision. But the bottom line remains clear: you can save a considerable amount of money.

How much, you ask? Lets take a look …

Lets say you owe $19,500 or so in credit card debt. That’s a significant sum to most folks. Now lets say that the credit card company is charging you 11.4% interest–not a great rate, to be sure. In this case, you might be paying more than $180 per month in finance charges. If you make the minimum payment of $200 per month, you’ll likely never pay the loan off. Divide that $19,500 by $20 of principal per month and you’ll end up with 975 months … that’s 81 years and change. 81 YEARS.

If you take out a ten-year home equity loan at say 5%, your monthly payments may be in the same $200 ballpark. The difference is that a larger portion of your payment each month will go towards paying down your principal. If you make only the monthly payment each month, you’ll retire the home equity debt in ten years.

(LendingTree and other loan websites have calculators to help you figure out exactly how much you can save. The results may amaze you.)

Straight home equity loans enforce a certain amount of financial discipline. You borrow a set amount of money for a set amount of time. If you opt for a fixed rate loan, rather than a variable rate loan, you’ll know exactly how much the loan will cost you over the long run. If you gamble on a variable rate, you may or may not end up ahead. Variable rates can be enticing, as the initial rate is usually less than that of a fixed rate. But a variable rate loan rises (and yes, falls) depending on its index. You’ll never know exactly how much a variable rate loan will cost you over the long run until you’ve finished paying for it.

Is a home equity loan right for you? I can’t answer that.

But I can honestly say that a home equity loan has saved me thousands of dollars over the years.

Maybe one day I’ll have the means to pay for everything in cash. Until then, you’ll know why I write from the splendor of Ranchero Indebto. :) Standard disclaimer: I’m not a financial professional … I’m just a writer. I can speak about this stuff from personal experience. Your mileage may vary.