Paying Credit Cards with a Home Equity Loan

Credit Karma — Fri, 16 Jan 2009 22:50:13 +0000

The majority of all citizens in Americans are carrying some kind of credit card debt. Unfortunately, there are so many of us that are carrying such a high amount of debt at high interest rates that we cannot pare down the amount that we owe, even when we send payments to the credit card company on time every month. Falling behind only makes the situation even worse, especially when you begin to consider late fees and finance charges which begin to appear on subsequent statements. More often than not, a single late payment can result in a significant hike to your interest rate. High interest rates begin to add up quickly, and can result in even higher monthly credit card payments, making them do even less to help you reduce your credit card balance. This cycle is vicious and it can be difficult if not impossible to get yourself out of.

One effective solution that may allow you to get off the credit card roller coaster once and for all is to obtain a home equity loan, using it to pay off the high interest credit card debt that you are struggling with. Homeowners can take out home equity loans for a variety of purposes including making home improvements, but why not take a home equity loan out to eliminate your high interest debt instead, making it easier for you to deal with your month to month expenses?

Benefits -

There are a number of benefits that come with credit card refinancing, including a decrease in the interest rates that you are paying. The other primary benefit comes from the fact that you will not be incurring any more debt when paying your credit cards off with a home equity loan, because you are keeping the amount you owe the same, and are moving the debt to a repayment method that is more affordable. If you had previously been fighting to keep all of your payments up to date every month, using a home equity loan to pay your credit cards off will essentially effectively consolidate your debt, making it much easier to pay off over time by allowing you to pay one single loan instead of several.

Here are some of the additional benefits associated with refinancing your credit card with a home equity loan:

- Elimination of variable interest rates by getting a fixed interest rate.

- Potential tax benefits with interest rate write offs on home equity loan interest.

- Consolidation of a number of payments into one single monthly payment.

- Lower monthly payments associated with longer terms and lower interest rates.

- Easier record keeping.

- The ability to write and mail a single month rather than numerous for easy tracking.

Once you pay your credit cards off, put them away and do not use them unless you absolutely have to.

Caveats -

The major downside of this approach is that you are now using your home as collateral for your credit card debt. Should you have a a financial emergency, you could run the risk of losing your home from credit card debt.

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Paying Credit Cards with a Home Equity Loan

Benefits -

Here are some of the additional benefits associated with refinancing your credit card with a home equity loan:

Caveats -