Should You Use a Home Equity Loan to Pay Off Your Credit Cards?

Think Twice

If you’re thinking about using the equity in your home to pay off your credit card debt, you may want to think twice. While it’s true that you can probably get a better interest rate with a home equity loan than you are currently paying on your credit cards, you need to ask yourself a few questions first.

Secured Debt vs. Unsecured Debt

The first question you need to ask yourself is, are you really willing to put your home up as collateral to pay off your credit cards? Right now your credit card debt is an unsecured debt. If for some reason you were unable to pay it, you would risk ruining your credit but at least your possessions would be safe. On the other hand, if you can’t make a home equity loan payment, you risk losing your house.

Other Options

There are other options besides a home equity loan when it comes to lowering the interest rate on your credit card debt. For example, you can do a balance transfer from your current high-interest card to a low-interest credit card with a great introductory offer.

If you don’t qualify for a low-interest credit card but you need to slash your credit card payments you might want to consider consumer credit counseling services that offer debt consolidation. Rather than putting a lien on your home, you can consolidate your debt via other methods.

Just remember, if you’re considering a home equity loan to pay off your current credit card bills, you might regret it in the future. It’s better to lose your good credit than it is to lose your home.