I am not sure of how it works but it said to deposit your money you pay your bills with into your line of credit account and pay from there. I understand this allows for the tax deduction but am uncertain on it works on paying off debt quickly anyone familiar with this concept?
2007-09-21 07:53:14 · 6 answers · asked by ideame 3 in Business & Finance ➔ Personal Finance
You are probably talking about a home equity line of credit (HELOC, for short). You are pretty much taking out a second mortgage on your home and using this money to pay off the old debts. Since it is a lien against your home, the interest is tax deductible. Here's the tricky bit where a lot of people screw themselves: CUT UP THE CREDIT CARDS!!!! There is no sense in getting another $25k (or more) in new debt to pay off old debt, and then racking up the same old bills ALL OVER AGAIN. You'll kill your credit and you will seriously overextend yourself. Be careful and follow the plan.
2007-09-21 08:04:59 · answer #1 · answered by Anonymous · 1⤊ 0⤋
This is an old remake concept that really does you not good,
Again you are using you home for collateral againest a line of credit to pay off debit. In a sense this is a tax free debt solution of putting yourself into debt.
You don't barrow money to pay debt, the only exception to that rule is is you can borrow money on a short term note with at least a 3% difference in interest.
And that you will be able to pay off in less then 12 months.
Remeber that it took you how long to get into to debt, so your not going to get out of it much faster.
You can work with creditors to get interest & penalties reduced or dropped, this makes a huge dent in debt when you take away interest.
The best way to get out of debt, Stop aquiring new debt. Destroy any credit cards you have now. Run a credit report, ask for you free yearly report from all three. Then go through and find the small amounts, highlight them in red, then the next highest ones in yellow and then the large ones in green.
Starting at the red line pay the little ones first, then move on to the yellow ones, once you have those taken care of all you have lft are the big once. Pick on Green and work hard at giving all the extra money you have to pay it off, then the next.
Soon you will be out of debt.
You should never have a credit card that you can't pay off in full each month.
2007-09-21 08:11:16 · answer #2 · answered by Randy W 5 · 0⤊ 0⤋
Bad idea. You put all your bills on your house. Then you can run all the credit cards back up. Now you have all that unsecured debt on your house and your home is in jeopardy.
You end up stinging out the payments over a longer term with the equity loan which means a lot more interest.
Set up a budget and work on paying off your debts one at a time. Put as much as you can squeeze out of your budget on the highest interest rate debt, while making minimum payments on the rest. When the highest rate debt is paid off, move to the next till they are all paid.
2007-09-21 08:05:09 · answer #3 · answered by bdancer222 7 · 3⤊ 0⤋
it sounds like, roll all of your debt into a HELOC. then use your cashflow to pay down your HELOC. Its a good strategy of you are paying off high rate credit card debt with lower rate HELCO debt, but its still debt. Its also secured by a 2nd mortgage, do if you fall behind they will try and take your home. If its too easy to access, you will also be using your home's equity without knowing it. Its a good idea if you are diciplined about when you access your home equity line.
2007-09-21 08:00:25 · answer #4 · answered by redwine 6 · 0⤊ 0⤋
your not out of debt until the home equity line has been
fully refunded and you don't owe anything
2007-09-21 08:00:10 · answer #5 · answered by Anonymous · 0⤊ 0⤋
You would be taking out a loan to pay off your loans. Is that what you really want to do?
2007-09-21 08:01:26 · answer #6 · answered by magiccharm 5 · 1⤊ 0⤋