Home Equity Loan - Do I want a home equity line of credit or home equity loan?

Do I want a home equity line of credit or home equity loan?

I just bought a house a week ago and want to get a loan to help pay off my credit card debt, which is about $8,000 and is currently at a 10% APR. We bought the house for $215k, put $6,000 down. The house was appraised at $225k - $10k more than what we bought it for. What type of loan can I get or should I get?

Public Comments

Probably a loan because the rate will be fixed and you wont be as tempted to use more than you really need.
It depends on how good you are at managing your money. Here's an article describing the difference between the two: http://www.kiplinger.com/basics/archives/2003/03/equity1.html And here's a calculator to help determine which would be better for you: http://www.bankrate.com/brm/calsystem2/calculators/LoanVsCredit/default.aspx
It is foolish to put unsecured credit card debt onto your home. That is exactly how may people end up losing their homes. Typically the credit cards get ran back up and you just have another loan payment on top of the credit cards. While you might get a slightly lower interest rate, in reality you would end up paying much more interest due to spreading the repayment out over a longer period. Tighten you budget and concentrate on paying off the highest interest rate credit card first, while making minimum on the rest. When the highest is paid off, move to the next till they are all paid off.
Well, the difference bewteen a home equity line of credit and a home equity loan is this: the line of credit is revolving (like a credit card) and you can continue to take from it and repay it monthly. A equity loan is a set amount paid in a lump sum to you. Once you spend it, that is it. You just make a monthly payment that is set from the get-go. Good luck to you!
I agree with bdancer. It's foolish. Just work on paying it down or try and get one of those 0% or low APR balance transfer cards. Do not offer your home up as collateral because that's what you will be doing. It just puts your home at more risk if something happens and you can't pay. The home comes first.
I wouldn't get any loan at all!! It only appraised for 10K more than you paid for it. With the market fluctuating the way it is, you may not be able to actually sell it for what you owe. If something should happen, that 10K of equity will be swallowed up in closing costs. I know you don't plan on having to sell, but you always want to be prepared. Accident, illness or job loss can be devasting to your finacial future. It would be better to default on a credit card payment than a loan on your home. How about getting one card and moving all the credit card debt to one company? You also have the option of negotiating lower rates with them. If you've had good payment history, they will work with you. Most people who get a home quity loan or whatever to pay of credit card debt end up getting into trouble. They continue using the cards and within a year have charged up what they owed before, but still owe the loan they used to pay it off. Instead, pay alot more on the card with the higher interest rate until it's paid off. Then move to the next card etc.
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