Home Equity Loan To Pay Off Credit Card Debt

 · Traditionally, home equity loans (and lines of credit) have been used to fund property improvements such as remodels and additions. Over the past decade, however, it has become fashionable to use this money for consumer spending. Or for debt consolidation. Robbing Peter to pay Paul Using home equity to pay off debt is an appealing option.

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Dear Debt Adviser, I am considering refinancing my mortgage. My plan is to take money out in order to pay off my credit card debt. I owe $80,000 on credit cards, which is actually more than the.

I took out a home equity loan to pay off my credit cards. In 1998, I had more than $16,000 in credit card debt. I applied for – and was granted – a home equity loan. I used this money to pay off my outstanding debt. I cut up my credit cards. When I was certain that my balances were paid in full, I cancelled the accounts.

If you are considering doing this, realize that it’s rarely if ever a good idea to pay off credit card debt with the equity in your home. For example, if your house is worth $200,000 but you only owe $100,000 on your mortgage, you could potentially remove some of the equity in order to pay off debt with a higher interest rate attached to it than what you pay on your mortgage.

Credit card interest rates fluctuate and that unpredictability can wreak havoc on your budget and financial plan. Finally, the interest you pay on a home equity loan is potentially tax deductible. You can deduct interest on up to $100,000 of home equity debt when you itemize your deductions (subject to limitations based on income).

Principal Interest Taxes And Insurance Principal payments are not expenses. and the paperwork does provide space for you to include property taxes, mortgage insurance, and interest payments as expenses. Take care to properly.

If you’re considering tapping your home equity to consolidate credit card debt, consider the pros and cons, as well as options that don’t risk your home.

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Using a home equity loan for credit card debt works for some people but could lead to disaster, especially for those with trouble managing consumer debt. The biggest potential problem is that you convert a consumer debt, which doesn’t require collateral, into a home loan that does require collateral.

Interest rates on home equity loans and lines of credit are much cheaper than those. to pay off credit card balances, for example – using checks or a debit card.

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