Does it EVER make sense to do a Home Equity Loan for CC Debt Consolidation?

Question

Two lenders are telling me it will be the BEST thing i ever did for myself. I have 3 bad debts and a FICO of 551.

Why am I going to pay THREE TIMES over in interest to "make these go away" and put my house as collateral....changing an unsecured debt to a huge secured one? Seems like a no brainer....

Why do so many people do it? Am I missing a key benefit?

I havent done it ...pretty sure i wont.

Answer 1

There's no key benefit, just a sales pitch.

Essentially, you need to focus on debt reduction. You need a written budget and you need to stick to it. A budget isn't a negative thing, it's a positive thing. It's a plan. It keeps you on track.

I paid of $19,980 in 15 months! How? I had a plan and I stuck to it. Now, I have a paid for pickup and nothing in debt except the house. And while I'll like a new F250, a John Deere and new saddle for the horse, I'm saving up.

Cash is King.

Answer 2

Yes! If, and only if, you CAN change your spending habits! CC debts gave a higher, and sometimes, MUCH higher interest rates than home equity loans. So you continue to pay x dollars each month with very little going to the principal ( what you really paid to buy stuff). If you get an EL to consolidate those CC accounts, your interest rate will be lower and fixed ( ie, 7% vs 15-20%). Also, depending on your tax rate you may be able to itemized your taxes and write off the interest you are paying on an EL. You CAN'T do that with CC interest. However, you need to close the CC after you pay them off. Maybe open another CC account and TELL the lender you want a maximum credit amount on the card. YOU control it! Hope this helps. You need to take control no matter what!

Answer 3

confident, in case you do now no longer own a house and prefer to bypass out of renting, a debt consolidation company could relatively help. the easy way is likewise to for my section paintings including your lenders to contruct a cost plan. they're remarkably versatile with consumers whilst they comprehend they're attempting to pay off charges in truly little whilst. Remeber customer credit Counseling reads on your credit checklist in basic terms approximately precisely as in case you declared a economic catastrophe 13 economic catastrophe. economic catastrophe even although, does help people who incredibly haven't any diverse option to debt mediation.

Answer 4

Makes no sense to me either. Lots of people do it to pay off credit cards and car loans.

Not only do they end up paying all that strung out interest, but most tend to run those credit cards right back up and go out in 2 years and buy another car they can't afford.

It's just another way people use to live beyond their means.

Answer 5

Yea, that would be pretty stupid. Put that money on your house. Something happens and you cant make the payments. Goodbye house.

The goal is to pay off your house. not add to the cost/debt.
You just never know what tomorrow will bring.

Answer 6

I'm confused by your question....

"Why am I going to pay THREE TIMES over in interest..." What are you talking about?

My HELOC is in the 8% range. The interest is tax deductable.

Your credit cards are probably 15%-25%? The math is a no-brainer. An equity loan is going to save you money (if done right). And yes, there is some risk. If you don't make the payments you will lose your home. Is your income situation at risk?

The biggest problem people have is to get a home equity loan, then turn around and run up their credit lines again. Now they are in twice the debt, and end up filing bankruptcy. As long as you understand the risks you should have no problem.

Answer 7

they tell you it is the best thing because they are making
the money !!!!

creditinfocenter com

Answer 8

It depends, I did it 3 years ago lowered my monthly payment by $600.00 and got to write off the interest.

I took out a 5-year note and paid it off in 3.

Have not paid interest on credit cards since.