There is no "best" choice between a simple second loan and a HELOC. Instead, go with the option that makes the most sense given your finances and preferences.

How can I avoid the debt monster? If your reason to get a home equity loan is to pay down consumer credit, that's fine -- as long as you do not go out again and rack-up more consumer debt for credit cards, car loans and other expenses.

Combine home equity payments with a new set of hefty consumer bills and your financial position can get worse so plan ahead: Part of every home equity loan should be a plain commitment to establish a budget and avoid additional consumer debt.

Is there a catch to those home equity loans that require no cash to close? Such financing often comes with a pre-payment penalty if the loan is terminated within a given period, say two or three years. The logic here is fairly sensible: The lender had cash costs up front to close the loan and wants a reasonable period of time to recover such expenses. As a borrower you want to make sure the prepayment period is limited to just a few years, the shortest period possible.

You also want the best rates and terms, but beware of loans with low rates up front for a few months -- and then far higher rates and payments in the future. As always, shop before you settle.

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