Home Equity Loans Versus Credit Card Debt Consolidation

Current statistics show that American credit debt totals $785 billion and this comes to an average of $7,500 per household. Many of us however, carry much heavier loads. Credit card debt is insidious, growing while we pay the absolute minimum payments and still use our cards. Revolving debt can lower your credit rating and create a financial situation where you are working just to make your payments. If your credit card debt is getting out of hand, now may be time to take a hard look at your spending habits and your options.

Many people are nervous about using the equity in their home, wanting to consider their house an asset that should not be touched rather than a financial tool, but this isn’t always the best approach to solving debt problems. “I understand the psychological basis for a homeowner wanting to minimize and ultimately pay off his/her mortgage,” notes Joseph Badal CEO of Thornburg Mortgage Home Loans, Inc, “but it makes no sense to sit on equity in a home while maintaining high installment-debt balances.”

There are a great many reasons to mine your home equity instead of making payments on revolving debt. Credit cards are open-end loans, unlike home equity loans. Most home equity loans have fixed interest rates and are considered closed-end loans. Credit cards are revolving and credit cards have compounding interest. Home equity loans and lines of credit have mortgage interest that is tax deductible unlike credit cards where the interest isn’t tax deductible. Also credit cards are not secured by your home, which means higher interest rates and payments. The bottom line is that credit card debt ultimately costs you more money than a home equity loan.

There are many different home equity loan products available to consumers and with carefully consideration the right one may help you solve your debt problem. Find a reputable mortgage broker that you can trust and talk over your options. Paying off revolving debt with a home equity loan will consolidate and likely lower your payments, placing you in a better position to work at paying off your debt. The trick, of course, is to cut up your credit cards and cease building debt once you have consolidated. Use your equity wisely and it can be an important financial tool.

Lenders Nationwide has home equity loan options for borrower’s seeking fixed rate debt consolidation. Consider using your home equity for a prime rate payment reduction, cash out, debt consolidation or simply accessing additional cash. Refinance loans can be a valuable tool for many purposes . Get a traditional home equity loan refinance or consider a cashing in on your home’s equity through a 1 st mortgage refinance while the interest rates are still below seven percent nationally.

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