Home equity loan to pay off credit cards?

Question

Hi all, my home is 100% paid for, it's value is approx 160,000....I owe approx 30,000 in CC debt, I am paying around 1000 monthly to these CC's, would it be good to borrow the money and pay off the CC's and have one lower payment?....I have always heard not to do this,but the balances arent going down much on the CC's and i want to get out of CC debt.....I have already cut the cards up and from now on if I cant pay cash I dont get it----thanks min advance--will

Answer 1

Check the interest on your credit cards, if it is much higher than what you can get on HELLOC (Home Equity Line of Credit) then do it. Of course you have to be responsible and try to pay that line off as soon as possible. I do not subscribe to the idea that unsecured debt is that much better than secured. First of all if you stop paying the creditors, they can still ruin your credit and obtain a judgment against you and based on that judgment still go after your house.
If you borrow against your house, the interest may be tax deductible, and the rate is almost guaranteed to be lower. You could probably get a line of credit with a rate as low as Prime - 1%, which is pretty good.
Anyway, this is my opinion, you have debt and at this point you need to make sure that the terms of debt are the easiest, so you can pay it off sooner. Borrowing against your house should get you those terms. BTW, there are two types of Home Equity Debts:
Home Equity Line Of Credit -- variable rate, but you pay interest only on what you owe right now;
Home Equity Loan -- you borrow the amount you need rate is fixed for the life of the loan and usually amortized over about 5-7 years. In your case Home Equity loan may even be better option, since it forces you into repayment.
Make sure you find a bank that will give you either of those two things with no closing costs.

Good luck.

Answer 2

Personal Opinion: I am in the same situation, except my house is not entirely paid for. What I was told by a financial councelor was to get a personal loan to cover my high interest CC debt. Hopefully, the personal will have a lower interest rate. So, in a sense, I combine my total CC debt into One lump sum, and pay it back at a lower interest rate, plus I have a smaller payout each month. Which can be altered to pay off the debt faster.

One factor about the Home Equity Loan is that, if you fail to pay it off, you risk losing your home. Its possible to lose a 160,000 dollar home on a 30,000 dollar equity loan because the bank want's it money back, and your home is the collateral. But, a Home equity loan is the easiest easy to get since you have your house paid off.

The biggest factor in paying off all your cc debt at one time is you erase your credit history. This being the Second item looked at when calculating your all important Credit Score. If you have no history, you end up with a very low Credit Score, which costs you money in the end. Its best to pay off everything except one card. So you keep that history going.

P.S.: Number One, when calculating your Credit Score, is Derogatory statments you make to bill collectors, and number three is having more than 33% of your total debt on one particular card. both will lower your score dramatically.

Hope this info helps. Cheers!

Answer 3

NO NO NO NO!!!

Pay the credit cards down by attacking the smallest one first and making minimum payments on the others.

Everyone will tell you how great it is to consolidate your debts. What they won't tell you is that probably 75% or more go right back into debt after they see those zero balances on the C.C.'s

Buckle down, sell some things, and maybe even get a part time job on the side. You will be amazed at how fast you will burn through that debt if you change your lifestyle a little bit. Just kill those small ones first and attack the larger ones. Kudos on owning your house, don't take a loan out on something you have worked so hard to pay off.


Good luck, I know you can do it!

Answer 4

Well here is an example for you: If you borrow $30,000 at 10% interest rate (small loan amounts have a higher rate, but I am guessing even higher because I don't know what state you live in, so chances are you would get a lower rate) on a 15 year loan. Your debt would be paid off for sure in 15 years and your monthly bill would be $160.51
(double your payment and it will be paid off completely in 7.5 years)
I am a loan officer, and deal with a lot of small loans like this, mostly for home improvements, so you can trust my numbers. So the question really goes back to you... is that something you would like to do?

Answer 5

I would consult a professional on this one. It's great that you cut up the cards, but what you need is really debt consolidation, and perhaps some counseling to find out why you got yourself so far into debt in the first place. It's easy to do, but you need to change your pattern and just cutting up cards is not enough. It is VERY risky to use your home as equity, especially when you had a problem with spending prior to this point. Consult a professional for debt consolidation.

Answer 6

Most home equity rates are lower than credit card rates. You would probably save money with a lower rate. There are some limits as to how much equity you can take out of your house. Talk to a reputable mortgage broker or bank to find our more about your case. Every situation is different.

Answer 7

Credit card debt is unsecured debt meaning if you dont pay them they cant take your house, but if you take out the HELOC, which is called secured debt and cant make the payments for some reason then they can take your house. try transferring the balances to lower interest rate credit cards. or call the credit card company and threaten to transfer your money to another credit card company if they dont lower your rates. I would advise against taking out the HELOC

Answer 8

Using a home equity loan to pay off debt is risky because you are trading unsecured debt (credit cards) for secured debt. If you stop making payments on your credit cards, you won't lose your house. But if you stop making payments on your home equity loan, you could lose your home.
read more about credit card at: http://www.credit-card-forums.com/index.html

Answer 9

Consolidate it with the below company. Just make sure you won't max out your cards again

Answer 10

Every time i ask a question, even if it's the easiest one, they can't offer me a good informed answer . What happened to people who actually take the time to answer??