Should You Use Your Home Equity To Pay Off Credit Card Debt?

Posted November 26th, 2009 by Spike

How To Pay Your Credit Card Bills Faster

If you owe a lot of money on your credit card, you may be thinking of using your home equity to pay off your loans. Is this a good idea? Sometimes yes. Sometimes No. Here are the 3 primary benefits of doing so:

1. Low rates of interest.

Your home equity account interest rate will probably be at least 4 or more percent less than your credit card interest rate. This will let you keep more of your hard earned money in your pocket.

2. Pay off loan faster.

Since you have a lower rate of interest,, you will be able to liquidate your debt a lot quicker. For instance, assume that your credit card annual interest rate is 20% and your balance is $5,000. If you pay the balance off in 12 months, you’ll pay approximately $5,558 total. If, you transfer your debt to your 5% home equity loan, you can pay this debt off in only 11 months.

3. You end up with more money in your pocket.

Taking the identical circumstances as above, with the 20% rate of interest, by year’s end you’ll have paid out $5,558. With the lower home equity interest rate of 5% , however, you’ll end up paying only $5,138 – nearly 9% less. And the bigger the amount of your credit card debt, the more you benefit by transferring your balance.

Should you always transfer your credit card debt to your home equity account? No. But it does help to remember that you always have options in disposing of your debt.

Please see D. Hoyer’s bankruptcy site for more information on chapter 13 bankruptcy rules, bankruptcy credit report, and more information on chapter 7 bankruptcy.

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