Using the equity in your home to consolidate your credit card debt can be a good solution, in some circumstances. Not all, however, you need to understand the process, the benefits and the drawbacks of this method. Consider the facts below to decide.
Just about everyone, at bill time, opens their credit card bills and wonders what they can do to bring down their total payments. If you have several credit cards and all of them have a 15% interest rate or higher, you are paying a lot more in interest rates than you can imagine.
Many people do not realize just how much of their monthly payments are going towards the interest of their total purchases. Credit cards are often thought of as quick money and very little thought is given to how much they really pay for purchases when they put it on a credit card.
This leads to the question of options. What can you do to lower your interest rates on your credit cards and is that even possible. What about a loan of some sort, will that solve the problem? Keep reading and you will find the answers that you are looking for.
Your House as Equity
One way that homeowners can pay off credit card debt is by getting a home equity loan or line of credit. A home equity loan is a loan that is given to you based on amount of money you have paid on your home. Equity is built up over time or if your house increases in value. For example, if you purchased a home with a value of $180k in 1990 and you have paid down half of the loan, then you have equity in your home of $90k. If the value of your home has increased, (which can be determined with a home appraisal), then the equity in your home is the amount that you have paid on your home as well as the increased rate.
Home Equity Loan vs. a Line of Credit
A home equity loan can be as little as you want or as much as the equity you have in your home. You need to understand, however, that in addition to your current mortgage payment, you will also have to pay for the loan that you have received. If you use the money to pay off your debts, then you will likely find that you have a much more affordable payment with your loan than you did with your credit card debt. Just be careful and don’t max out your credit cards again as you will then have even more bills to pay.
A home equity line of credit is a bit different from a home equity loan. A home equity line of credit allows you to only spend exactly what you want from your home’s equity. It works like a credit card, with the line of credit being the amount of equity in your home. The upside to taking a home equity line of credit is that if you don’t use all of the money then you aren’t paying it back. The downside is that the interest rate for a home equity line of credit is higher than a home equity loan. However, it will still be considerably lower than your current credit card interest rates.
Which choice you make is up to you and your situation. You should shop around for a loan, however, and don’t assume your bank is going to offer you the best home equity loan or line of credit. Many people don’t realize that they can talk to any lending institution about this type of loan. However, you may have an easier time with your bank simply because all of the information that you need is already in place.
Options for Non-Homeowners
Not everyone owns their own home; in fact, there are those people who choose not to own a home because they don’t want the hassle of the upkeep and so on. Therefore, what are their options if they want to pay off their credit card debt?
Well, for non-homeowners, you have several options. In fact, homeowners have the following options as well; they just have to decide which option is best for them. For non-homeowners, your only options are to get a loan or to get a low interest rate credit card that will allow you to transfer the balances of your higher interest rate cards to the new card.
If you are in the market for a loan, then you will want to shop around to different lending institutions. There are plenty of sites online that will help you search for the right loan as well, which will save you a lot of time and legwork searching for a loan. Sometime your best deal is going to be from your bank and sometimes you are going to find a better deal elsewhere.
If you have bad credit you may find it is difficult to impossible to get a loan, especially in the current lending market, and you may want to turn to a friend or relative for a loan. If you elect to take this option, then treat the loan like you would any business deal. Put the terms in writing and make sure to include interest. Most importantly, don’t renege on the debt, it is terrible to put a friend or loved one in that type of situation.
If you prefer to take the new credit card route, then you will want to use our chaser tool. Our chaser tool does everything for you and allows you to simply sit back and wait for the right credit card to be presented to you. All you have to do is fill out our simple form and we will then search the Internet for the cards that meet your specifications. You might be surprised at just how many options there are available to you.
How to Transfer Your Debt to Your New Credit Card
When you allow us to search for the right credit card for you, make sure you include in your search that you want to transfer your balances from your other cards to a low interest rate card. This will ensure that we find the best balance transfer offers on the Internet. Once you have chosen your card, submitted your application and are approved, it is time to transfer your other balances.
Most credit card companies allow you to take care of this online. You will have access to three (or more) electronic checks in which you fill out the information and send the payment to your credit card company. Once they “cash” the check, you no longer owe your old creditors money and the balance is transferred to your new low interest card. You then start making your payments to a single credit card.
If you prefer, you can also have paper checks sent to your rather than making the transactions online. The choice is yours and it depends on your comfort level. If you have decided that getting a new credit card is the right choice for you, then try our credit chasing tool. You will quickly find the right card and get on the path of lower interest rates and more reasonable payments. Try our free credit card comparison tool now!
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