Ah, one of the questions for the ages. Shall you or shall you not pay off your credit cards with home equity? Let’s say you ran up a credit card on a bunch of crap you didn’t need and are now being charged 15%. You’ve seen the error of your ways, and now are interested in paying off your debt. How should you go about it? Should you use Home Equity? Blueprint For Financial Prosperity suggests that, while you may be saving big money by cutting your interest rate, you should think the decision over carefully.
“The big risk in doing this is that if you can’t pay off a credit card, it’s not that bad. Since it’s unsecured credit, they can’t come and legally seize anything (unless you go bankrupt, and even then your home could be safe if you live in a state like Florida). If you pay off your credit card with a home equity loan and then you can’t pay off that home equity loan… they will come and take your house.“
So if you’re still the irresponsible home theater system charging rascal you once were, you might want to think carefully before you risk your house. You could use a 0% balance transfer, for example, to cut your interest without additional risk to the place where your children sleep. On the other hand, if you’re truly on the straight and narrow…—MEGHANN MARCO
Pay Off Credit Cards with Home Equity? [Blueprint for Financial Prosperity]