Advantages of Paying Off Credit Card Bills With Home Equity
Using Home Equity To Pay Off Credit Card Debt
Many people who are deep into credit card debt think of using their home equity to pay off their loans. This can be either good or bad depending on how good you are at managing money. The three main benefits of doing this are:
1. Reduced interest charges.
The interest rate on your home equity account will be three, four, or more percent cheaper than the interest rate on your credit card. This lets you keep more of your money in your pocket.
2. Pay off loan faster.
Because your interest rate is lower, you can pay off your debt much faster. For example, assume that your credit card annual interest rate is 20% and your balance is $5,000. If you pay the balance off in 12 months, you'll pay approximately $5,558 total. If, you transfer your debt to your 5% home equity loan, you can pay this debt off in only 11 months.
3. You simply end up paying less money.
Taking the identical circumstances as above, with the 20% rate of interest, by year's end you'll have paid out $5,558. With the lower home equity interest rate of 5% , however, you'll end up paying only $5,138 - nearly 9% less. And the bigger the amount of your credit card debt, the more you benefit by transferring your balance.
That doesn't mean that you should immediately transfer your credit card balances to your equity account. In some cases, this would be a disastrous idea. The important thing is to simply take stock of all the options you have when paying off a debt.
Please see D. Hoyer's bankruptcy site for more information on chapter 13 bankruptcy explained, bankruptcy credit report, and chapter 7 bankruptcy information.
Mail this post
Related posts:
- Getting Your Head Around All Your Debt Management Options In the present downturn, how to get out of...
- Zero Percent Balances for Home Improvement Life isn't all fun and silliness, is it? After my...
- Bluetooth’s Advantages And Disadvantages Bluetooth's Advantages are many. Bluetooth has a great deal to...
Related posts brought to you by Yet Another Related Posts Plugin.