What kind of home equity loan is best to pay off $15,000 in credit card debt?

Hands holding fanned-out credit cards

Q. I own my own home and am trying to figure out what would be my best bet to consolidate credit card debt. I owe about $15,000 on top of a $1,700 monthly mortgage payment. I refinanced approximately two years ago to consolidate old credit card debt but find myself still using them and accruing more debt. (I know it's stupid.) I need to do some home improvements and I am also getting married in the summer. I figured I would look into taking out a home equity loan or line of credit to help. What should I do?

There's no easy answer to this one.

Home equity loans are pretty expensive right now - typically around 8% annual interest. If you got a $15,000 loan for 10 years you'd be paying $180 per month.

A home equity line of credit is how most consumers refinance their credit card debt.

But it's even more costly, averaging close to 7.5% but should edge lower.

Sure, you can only pay the interest on a line of credit, limiting your payments to about $100 a month.

But after five to 10 years you'd be required to start repaying the principal, so you're just postponing the pain.

With home equity rates so high many homeowners are opting for a cash-out refinancing. That allows them to refinance their credit card debt over a longer period of time and at a much lower rate, since the typical mortgage only costs around 6% right now.

Bottom line: Spend a little more on interest to get the flexibility of a line of credit.

Even 8% is less than what most credit cards charge and with a home equity loan of any type the interest is tax deductible.

Just make a concerted effort to pay down the principal as quickly as possible.

To be honest, what concerns us more than what type of loan you get is the fact that you have to get a loan.

Your home is probably your biggest asset and it is one that should be gaining equity and adding to your wealth.

Instead, it looks like you are using your home as an ATM machine to support a lifestyle you can't afford.

We know you don't want a lecture, but at some point the ATM machine will run out of funds and you will reach the end of the cheap loan trail.

We'd hate to see that happen.

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