Does a 4.9% credit card loan beat a 9.2% home equity loan in terms of money savings and tax benefits?

Question

I want to take out a $10,000 loan and I want to see if the credit card deal is better for overall savings. It's a lower rate than the home equity loan, but will the higher APR of the Home Equity loan paired with the tax breaks be better than a lower credit card(i.e. non-deductible interest) loan?

The rate is for the life time of the balance until paid off. It is primarily for balance transfers but the money can be used in any way I'd like.

Answer 1

4.9% is better.

If you are in the 28% tax bracket, you will only recoup 28% of that 9.2% paid. With that tax break in mind, it would only lower the interest rate to about 6.5%.

The only benefit to the home equity loan is that the montly payments may be lower, but your overall cost in the end would be higher.

Answer 2

The credit card is revolving line unsecured debt.
The home equity loan is fixed uses your home for collateral.
If you want the low rate of the credit card but the tax advantages of the home loan consider a home equity line of credit.
With the home equity line of credit. the rate is variable and tied to prime currently 8.25%. (you could qualify for lower).

It is tax deductible. Only, the interest portion of the balance is billed monthly.
Also, the line stays open (revoloving) for 10yrs so if you need another 10,000 or so later on...you can just draw from your line without having to reapply or take out a new loan.
hope it helps

Answer 3

4.9% on a credit card sounds like it might be an introductory rate. Be sure that it will last the entire time it will take you to pay off the loan.

Answer 4

yes. find out how long is your FIXED(make sure) 4.9 rate going to stay, 1yr or more at 4.9 fixed is good. thats if you dont default or anything. if 1 yr then transfer it to a 9.2% home equity.