Let's talk about paying down debt and home equity loans.
Having multiple credit cards can be convenient since you don’t have to carry around that much cash, especially when making large purchases. The problem starts when you have large outstanding balances, and you want to pay them off as quickly as possible to avoid enormous charges on interest.
You may have heard about using a home equity loan to pay off your credit card balance. This article will look at the advantages of using this strategy in paying down your credit card debts.
How do home equity loans work?
Home equity is the portion of your home that you own outright. You can take out a loan against your equity with your home securing it.
For example, your home is worth $400,000, and you owe $300,000, which means you have $100,000 of equity.
You can apply for a home equity loan in this case and use the proceeds to pay for your credit cards while paying off your home equity loan in equal monthly payments.
The benefits of paying off credit cards with a home equity loan
Credit card interest rates are high, so paying those balances down fast is beneficial. On the other hand, a home equity loan has much lower interest rates. So when comparing which is a better debt option, you can see how a home equity loan is better.
Let’s say you are paying off 17% interest on your credit card while you can qualify for a home equity loan that charges 5%. That’s huge savings!
Credit card rates also vary over time, so you’ll be paying even more as rates climb. Home equity loan rates can come with fixed rates that ensure you’ll pay the same amount monthly throughout the loan.
Another benefit of using a home equity loan for credit card debts is you can streamline payments and simplify everything.
Juggling multiple bills can be a hassle. Having only one payment for a home equity loan decreases the chances of missing a payment.
Is this the right call for you?
A home equity loan is a good option to pay down your credit card debts as long as you know the risks and are sure that you can afford the payment plan.
If you can keep your home equity payments to a manageable level, you can eliminate credit card debts faster than going the usual route.
How to get started?
The application process for a home equity loan is generally the same as when you applied for your mortgage. The process may take up to 60 days, similar to a mortgage refinance.
If you think that a home equity loan is the best way to pay off your credit card debts, we can help by providing the best offers, rates, and terms.
Get in touch with one of our loan experts to know more about our home equity loans.