The main benefit of a debt consolidation home equity loans is that most states you can deduct up to 100% of the interest you pay for your taxes. Other advantages include the fact that home equity loans can usually have a lower interest rate than unsecured loans and borrowers are relatively large amounts of money.
While home equity loans attractive benefits, there are also major disadvantages. One of them is that if you are not the payment plan approved by the loan, the lender can foreclose on your home and you lose, even if you are in bankruptcy. Secured loans are not dischargeable under Chapter 7 bankruptcy.
Another major drawback is that exploitative lenders target homeowners, especially those with low incomes or bad credit. According to the Federal Trade Commission (FTC), there are many predatory fraud, including:
Equity Stripping: The loan will be processed on the basis of equity in your home, not on your ability to repay.