Having multiple credit cards can be helpful, especially when making large purchases. The problem starts when you have large outstanding balances, and you're having trouble paying them off quickly to avoid enormous interest charges.
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, if your home is worth $400,000, and you owe $300,000, this means you have $100,000 of equity.
In this example, you have the equity available to apply for a home equity loan and use the proceeds to pay for your credit cards. In this way, you'll pay off the home equity loan instead --which is a much more manageable and affordable debt that most prefer.
The benefits of paying off credit cards with a home equity loan
Credit card interest rates are high (anywhere from 15-24%) so it's in your best interest to pay those off fast. A home equity loan, on the other hand, has an interest rate that can be less than half of that! So when comparing which is a better debt option, you can see how a home equity loan is better.
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.
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 advisors to know more about our home equity loans.