MMI cautions consumers to carefully consider the risks of tapping into home equity through consolidation loans. While consolidation loans simplify payments by combining multiple debts into one payment, homeowners must qualify for the loan, may face higher interest rates with poor credit, and risk foreclosure if they cannot repay the new secured debt. MMI recommends that if taking a home equity loan, consumers must close all existing accounts to avoid accumulating new credit card debt that defeats the purpose of debt consolidation.

1. MMI Cautions to Think Twice Before Tapping Your Home's
Equity
HOUSTON--(BUSINESS WIRE)--March 29, 2005--With interest rates remaining relatively low,
consumers may think that a consolidation loan is an easy answer to debt trouble. According to the
Federal Reserve, Americans borrowed a total of $701.5 billion from their home equities as of the end
of 2003, up from $416.2 billion in 1997.
On the plus side, debt consolidation loans are attractive because it is much easier to make one
payment instead of writing checks to all of your creditors every month. For some types of
consolidation loans, interest paid may also be tax deductible. However, Money Management
International (MMI) offers the following things to consider before proceeding with this type of
financing:
Not everyone qualifies. If you decide to try to consolidate your
debts, the first hurdle will be to qualify for the loan. Your
ability to get a consolidation loan will depend on three primary
qualifications: (1) your probability of repaying the loan; (2)
your credit background to verify repayment record; and (3) the
necessary collateral to guarantee repayment. Lacking any one of
these three qualifications could result in a denial of your
request for the loan.
Your credit rating affects your loan terms. Consumers with good
credit scores will be awarded with lines of credit at or just
below prime rates. Those with low credit scores may end up paying
one to five points over the prime rate. Additionally, consumers
with good credit scores can usually avoid application and
appraisal fees.
A lower monthly payment does not mean lower monthly cost. To
understand the true cost of credit, figure out what you will be
paying over the life of the loan, rather than just looking at the
monthly payment, and be sure to factor in all of your closing

2. costs. Consider the length of time you plan to be in your home and
its marketability if you had to sell.
You could lose your home. Before you consolidate credit card debt
with a home equity loan, be aware that you would be trading
unsecured debt for secured debt. This means you are putting your
biggest asset -- your home -- at risk for foreclosure if you are
unable to make the loan payments on your credit cards.
"If you do choose this type of loan, be sure to close all your existing accounts to avoid the temptation
of incurring more debt," said Cate Williams, vice president of financial literacy for MMI.
MSN Money reports that nearly two-thirds of the people who borrowed against their home equity
between 1996 and 1998 to pay off credit cards had run up more card debt within two years (Brittain
Associates). Too often, the zero balances are too tempting and the consumer ends up in more debt
than when they started.
About Money Management International
Money Management International (MMI) is a non-profit, full-service credit counseling agency,
providing confidential financial guidance, financial education, counseling and debt management
assistance to consumers for over 47 years. MMI helps consumers trim their expenses, develop a
spending plan and repay debts. Counseling is available by appointment in branch offices and 24/7 by
telephone and Internet. Services are available in English or Spanish. To learn more, call 800-76-
-2271 or visit www.moneymanagement.org.