Word of warning: If you’re saddled with a lot of high-interest credit-card debt, you might be tempted to pay it off quickly by borrowing from your 401(k) or taking out a home equity loan. That’s usually a bad move. If you default on your home equity loan payments, you may lose your home.
Home Equity Debt Consolidation Loan Calculator. This calculator is designed to help determine whether using equity in your home to consolidate debt is right for you. Enter your credit cards, installment loans and any other debt you wish to consolidate by clicking on the ‘Enter Data’ button for each category.
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.
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.
Individuals with equity built up in their homes may wish to consider apply for a home-equity loan, which may be used to pay off credit card debt. Home equity loans offer the advantage of low.
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The one that jumps out at me is that if you shift unsecured debt, like a credit card, to a home equity loan, you’re shifting unsecured to secured. If you fail to pay a credit card debt, your credit score will suffer. By shifting that debt to something secured, the debt is backed by an asset (in this case your house).
Pros and Cons of Tapping Home Equity to Pay Off Debt. Rebecca Lake. Transferring your high interest credit card debt to a card with a lower rate or taking out a personal consolidation loan are two options to consider but homeowners also have a third choice in the form of a home equity loan.
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Is paying off a car loan with a home equity loan a good idea?. this to consolidate debt, and they often even bundle in credit card debt this way.