If you’ve been paying off your home for several years, you probably have some amount of equity accrued, which can be used to obtain home equity loans. And if you owe credit card debt, you may be able to use that equity to end those high interest rates.
The typical process is for you to apply for a loan from a lender who offers home equity loans, with the agreement that you’ll have the cash proceeds at your disposal. There are several reasons so many people are anxious to cash in equity on home equity loans to pay off credit card debt.
First, home equity loans typically carry lower interest rates than credit cards, which may be charging 15 or 20 percent interest on unpaid balances. Home equity loans normally come with interest rates that are about the same as a traditional home loan.
The interest on home equity loans may also be tax deductible – not true of your credit card debt.
There are other reasons to look for home equity loans besides paying off credit card debt. You may be looking at making some repairs or renovations to your house. You can refinance your loan to accomplish the same amount of cash, but that might not be in your best interest. If you took out your original home loan at a time when interest rates were very low, or you got other excellent terms on your home loan, refinancing may put you at a higher interest rate or with less desirable terms. Home equity loans can be taken out in addition to your existing mortgage, leaving the terms of that loan intact.
Remember that if you’re considering home equity loans because you want to eliminate the high interest rates you’re paying on credit card debts, you’re only going to be accomplishing your goal if you also keep your credit card spending under control. You may need to take a look at your spending habits. After all, if you go right back into debt, you may not have sufficient equity to take out additional home equity loans.
Home equity loans may be the answer to your cash flow problems.
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