Advantages of Paying Off Credit Card Bills With Home Equity
How To Pay Your Credit Card Bills Faster
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. Lower interest charges.
Your home equity account interest rate will probably be at least 4 or more percent less than your credit card interest rate. This will let you keep more of your hard earned money in your pocket.
2. Pay off your loan in a shorter time period.
Since you have a lower rate of interest,, you will be able to liquidate your debt a lot quicker. For instance, 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 pay less money overall
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 – a savings of nearly 9%. If your credit card debt is bigger or the disparity in interest rates rider, your savings will be even more.
Should you always transfer your credit card debt to your home equity account? No. But it does help to remember that you always have options in disposing of your debt.
David Hoyer is a freelance writer who writes articles relating to bankruptcy student loans and other bankruptcy related issues, visit his site.
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