Credit card debt is something that seems to nag at virtually every household in the country, but does it really have to be that way? If you’re a homeowner with a certain amount of home equity in your home, the answer might actually be no. You see, you can always take out a home equity loan and pay off your credit card debt completely. In fact, some people think this is a better option because you can actually deduct the interest from your home equity loan, something that you cannot do with a traditional consumer credit card. The only exception to this is a business credit card, but then again you wouldn’t be using home equity money to handle that debt anyway.
Yet the question remains: is it really wise to tap into your home equity for credit cards? The answer might be a bit different than you expect.
Again, it really goes back to your overall financial goals. You don’t have to live in fear of the credit card companies, especially if you know that you will be back on the right financial path after paying off your credit card bills. You just need to make sure that you’re actually taking matters into your own hands rather than just thinking that it’s impossible to get out of credit card debt.
This approach also assumes that once you are out of credit card debt that you will not rapidly jump back into charging up all of your credit cards. If you’re going to do that, then you don’t want to go through getting a home equity loan. If you compare credit cards to home equity loans, the stakes are much higher with the latter. You see, if you default on a home equity loan, the lender gets to seize your house as collateral. They can then sell the house and try to recoup the loan in its entirety. This can be difficult for people to understand, but it’s something that has to be understood in order to really see the power of home equity loans.
Some people view home equity liens of credit and loans as something that’s sort of a double edged sword. This is actually a fairly accurate comparison, considering that you will need to make sure that you do your best to ensure that you use your tools wisely. A home equity loan is what you make of it. If you use it wisely, you will be able to rebuild your credit very quickly and get back on the right path. However, if you spend the money frivolously on things that you don’t need, you will only slide deeper into debt on the whole.
Overall, if you’re not sure where to go with your finances, you might want to sit and talk with either a credit counselor or even a traditional financial planner to get a more expert point of view — this is general advice, after all. However, if you know in your heart that you’re ready to make changes in your finances, then a home equity loan could be just what you need in order to pay those credit cards off once and for all!