Consumer credit card debt is at an all time high and many people are looking for ways that they can payoff their debts and save the most amount of money. One option available to some people with equity in their homes is to payoff your credit card debts using a HELOC or home equity line of credit. Let us take a look into this method and see if it is a wise choice in paying off your credit card debt.
What exactly is a HELOC?
A HELOC is nothing more then a advanced line of credit that is secured against the equity in your home. It's basically a credit card that is backed by your house as collateral. As people build equity in there homes, they can take out these loans and use them to payoff other existing debts.
Why should you use it to payoff credit card debt?
Using your home line of credit is a great way to payoff your debt because it is a secure debt and the interest rate is much lower. Typically your credit card will have a much higher interest rate and the loan is not secured. Monthly payments can also be reduced with debt consolidated against your line of credit.
Is there a downside to doing this?
While there are a few positive things about using your home to consolidate credit card debt, there are also some things to take into consideration. When you consolidate your debt using your home, you have to be aware that your home is at risk if you fail to make payments. For some this can be seen as too much of a risk just to lower payments and eliminate interest on unsecured debt.
The other thing to consider is other alternatives available to credit card debtors like 0% balance transfers, debt settlement or debt management programs that can negotiate lower interest rates with creditors providing you close your accounts. Using a HELOC is just one of many options, but they all have the pros and cons.
Ultimately it is up to the debtor to take control over his or her finances in order to regain control of themselves financially. Even though one can utilize a HELOC for debt payoff, it can easily spiral out of control when someone decides to run up more credit cards against there credit cards. It eventually gets to the point where additional equity loans must be taken out and the debtor winds up owing multiple loans with no more equity left in there home leaving them in more trouble then when they started.
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