Home Equity Loan
Should I transfer Home Equity Line balance to credit card?
I have a home equity line with a balance of $87,000 at 7.99% and an offer for a credit card with 0% interest for a full year. I figured if I transfer $20,000 to the credit card I would save about $100 per month in interest. Is this a good idea? Will it hurt my credit to have that on a credit card? Is it better to leave it alone and take an interest deduction on my taxes?
Public Comments
- Refinance to pay off HELOC. Credit cards with over 30% of the balance in use hurts your credit. Forget the interest deduction on your taxes, refinance the HELOC and your closing costs are tax deductible. Call 866-348-4730 toll free for more information.
- No it is not a good idea. Yes it will hurt your credit. If you transfer the amount to a credit card it will no longer be tax deductible. The 0% will eventually go away after a year and you will probably still owe plus you take the risk if you miss a payment for any reason your 0% will go away. Check the small print. Also if you run up your credit card balance over 50% this will hurt your credit. 7.99% on a HELOC is not bad. If you want to reduce your payment check into combining your first and HELOC. Depending on various items it could reduce your payment.
- Emphatically no.
- You will save money if you (1) make all of your payments on time to the credit card and (2) you move the 20,000 balance back to the line of credit in one year, before the credit card interest rate goes up and (3) you do not make a lot of purchases using the new credit card. You should make sure that the line of credit will still be open in one year since some of them have a 5 or 7 year window of being opened followed by a fixed repayment term over perhaps 10 or 15 years. The 20000 on the credit card will hurt your credit but only a little bit and only until you get the 20000 balance back down to about 1/3 of your credit card balance. In other words your credit will be back up after you move your credit card balance back to the house line of credit in a year. This credit rating issue should not matter unless you are planning to take a loan (mortgage, car, etc) in the next year, and then only if it you were a borderline credit risk. I have done this without regret and saved lots of money, but you should make sure that you keep the line of credit open just in case you are ever late with a credit card payment and your interest rate goes up.
- What is the CC company charging for the balance transfer? That might bite into the savings on interest. Losing the deduction on the interest is no sweat. Paying interest is paying interest, and 0% is still better than effective 5.?%.
