Debt Consolidation: How To Use Home Equity To Consolidate Your Debt

Now Is The Time To Consider a Home Equity Line of Credit An equity line, or HELOC as it is commonly known, is a line of credit secured by a lien on your home. As with commercial lines of credit, you are allowed to draw on your line at any time just by writing a check.

However, you’ll likely pay a higher interest rate on that debt then if you use your home’s equity. In addition to the lower interest rates, another huge advantage mortgages have over paying the interest through the credit card itself or even a personal loan is the fact that mortgage interest is generally tax-deductible .

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The most common ways to consolidate debt are using a balance transfer credit card, taking out a personal loan and securing a home equity loan. student loan consolidation works differently than.

A "Home Equity Loan", "Home Equity Line","refinancing your mortgage / re-mortgage" and getting a "second mortgage" are all different names for the same thing and are sometimes used as a debt consolidation option. These terms refer to the bank lending you money against the portion of your home that you own.

Why using home equity is your riskiest option. The biggest risk of consolidation is only faced when you use a home equity loan or HELOC. You’re taking unsecured debt and securing it as your borrow against your home equity. If you fall behind on credit card payments, they can threaten as much as they like, but a creditor can’t take your home.

Credit card debt consolidation can involve using a balance transfer credit card. You could also take out a personal loan, home equity loan, or even a 401(k) loan to consolidate your credit card.

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There are dozens of ways to go about consolidating debt, and some include transferring the debt to a zero or low-interest credit card, taking out a debt consolidation loan, applying for a home equity loan or paying back your debt through a debt repayment consolidation plan.

You may save on interest by consolidating your debt. Here’s an example of how you can take advantage of the flexibility offered by a HELOC: If you consolidate your debt and make minimum, interest-only payments of $163.20 during the 10-year draw period, you’ll see a payment reduction of $288.67 per month. 3

Home equity loans and HELOCs are popular ways to pay off credit card debt, but only if you own your home AND have sufficient equity in it. If so, here are some of the pros for consolidating credit card debt with a home equity loan or HELOC. Lower Interest Rate. The average interest rate for a home equity loan is 5.81% and that rate is fixed.