Home Equity Loan - Is it wise to pay off credit card debt with a home equity loan?

Is it wise to pay off credit card debt with a home equity loan?

Is there a better option? My credit union is offering a consolidation loan and telling me that the average in our area is about 13.87 percent.

Public Comments

it is indeed very wise AS LONG AS THE INTEREST RATE, INCLUDING INSTALLATION COSTS, INSURANCE, ETC. is lower than your current rate. 13.87 , i think, is quite large a rate
Credit card debt, or revolving debt, is calculated daily, so a 10.0 revolving debt rate is far worse than a 10.0% mortgage rate. Without knowing your specific situation I would still guess that local banks charge 6-8% on a second mortgage (not a HELOC, or line of credit) and wholesale lenders would refinance your house at a similar rate (assuming a large credit card balance to be settled).
A home equity loan if often touted as a good way to pay off credit card debt, especially in areas where homes have greatly increased in price; however, you should know that technically, the interest on such a loan is NOT considered deductible by the IRS unless the loan is used to improve the property. It's likely that you could claim it anyway without the IRS auditing you, but it could happen, and in that case, you'd have to pay any back taxes plus interest to the IRS. This is a position you seriously want to avoid. Secondly, you're betting against your house that you can afford to pay this loan, Are you willing to close all the credit accounts if you take this loan, so you won't be tempted to run the balances up again? You won't have a way to pay them off again if you do. Remember that you're possibly putting yourself in the position that, should you need to sell the house for some reason, that you'd lose the equity you've gained over however long you've owned it. Is this a good risk? I have done this, and not long afterward, the prices of houses in my area dropped. I was stuck for quite a while until prices went back up, since I'd have to pay the balance on the first mortgage plus the balance of the home equity loan, and when prices finally went back up far enough that I could afford to sell, I got far less when I sold my house than I could have. So, unless you can very quickly pay off the home equity loan, and you know you can resist using your other credit again, it's risky.
i would have to say no. talk to the credit card company see if you can work out an installment plan or you could even try a debt counselor. what if you were not able to meet all your payments on your loan for some reason. you would end up losing on both accounts. check out all the answers first before you do anything but if i were to get an equity loan i would not want one for more than 9.0%. my last refinance was for about 8.5% but that was a long time back.
I went to www.bankrate.com and checked out the Home Equity rates in my area. Ever with fair credit(620-659) rates are around 8.5-9% so your quote is high. Unless you have a really low credit score you can probably do better. Also make sure that you get a loan and not a line of credit. Maxing out a Home Equity Line of Credit(HELOC) will hurt your score just like having your credit card(s) maxed. Check out www.bankrate.com and look at rates for your area, credit score range and amount of Loan to Value (LTV) Good Luck
If it were me, I wouldn't do it unless I was going to cut up the cards and close all of the credit card accounts once they were paid off. If you don't do this, you run the risk of not only having the home equity loan but also more credit card debt if you run up the balances again. Think very carefully about if because you could end up worse off. Weight all your option (they may be some you haven't considered), do the math, and pick the one that you feel most comfortable with and that will secure your financial future.
Credit Unions don't offer home equity loans. I think they are offering you a basic loan and calling it a "consolidation" loan. The interest rate is very high in my opinion. Go to the bank/mortgage company who holds your mortgage and get a quote from them. As stated previously, a home equity loan (in my opinion) is much better then a consolidation loan because the interest rate should be cheaper, and it's tax deductable. WARNING: Over the past few years home equity and consolidation loans have been heavily advertised as a quick way to get out of debt. That's a lie! You are simply shuffling around your debt, and spreading it over several more years. You MUST get control of your spending. Too many times I've seen people get consolidation loans, then turn around and charge up their (now empty) credit cards again. The result? Bankruptcy. Many thousands of people filed last year for this very reason. If you don't start to control your credit card spending, then start for a good lawyer...guaranteed!