Advantages of Paying Off Credit Card Bills With Home Equity

Paying Off Your Credit Card Balances With Your Home Equity

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. Reduced 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 your 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 simply end up paying less money.

Using the same scenario as above, with the credit card interest rate, you’ll pay $5,558. but with the lower home equity rate, you’ll only pay $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.

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