Should I Pay Off Credit Card Debt with Home Equity?

When consumers get backed into a corner financially, they begin to look for ways out.  It is not a bad thing to examine all of your options.  In that examination process, you need to consider the consequences of your choices.

In some cases, it might make sense to pay off your credit card debt with a home equity line of credit.  Here’s why:

Lower Interest Rates.  By lowering your rate, you can apply more of your payments to the principle so that you can pay off the loan sooner.

Stop the Snowball Charges on Your Credit Card Accounts.  Fees and other charges are likely adding up on your account every month and every time you look at them your heart sinks.

One Monthly Payment.  Consolidating your credit cards in this manner helps you manage your money easier by making only one payment to one place every month instead of to multiple accounts.

Those are the reasons that it makes sense to pursue this as a financial step to getting back on your feet.  However, there are consequences to doing this and you need to understand what can happen as a result of your actions.

Credit Cards Build Up Again.  If you keep using your credit cards after you have paid them off, you will eventually find yourself in the same position only now you will have a huge home equity loan balance, too.

Home Equity Becomes Like a Credit Card.  You start to use your home equity line like a credit card for frivolous purchases of things you really do not need.

Here is how to prevent these unintended consequences:

Close Your Credit Card Accounts.  Get rid of the cards by cutting them up into pieces.  Change your mind about credit and how you use it.

Do Not Use your Home Equity for Purchases.  As mentioned, stay away from using the home equity line of credit to make purchases.  Concentrate on paying off the home equity line as soon as you can.

Live Under Your Income Level.  Create a budget and live under it.  Make it a lifestyle change so that you do not find yourself in the same situation again.

What this question really comes down to is your attitude towards finances.  The fact that you have used your credit cards in a way that has caused you to pile up a large amount of unsecured debt reveals that you probably need some help with money management.  Find a good source of help before you take steps to relieve your debt problems.  There are great resources all over the Internet that can help you be a better money manager.  Using the advice that you hear, you can become debt-free and in control of your money.  And that is goal anyway, is it not?