Home Equity Loans for Refinancing Credit Card Debt

Many Americans remain uneasy about taking out a home equity loan to refinance their adjustable rate credit card debt. “I understand the psychological basis for a homeowner wanting to minimize and ultimately pay off their mortgage loan,” notes Joseph Badal CEO of Thornburg Mortgage Home Loans, Inc, “but it makes no sense to sit on equity in a home while carrying high rate revolving interest.”

Credit card statistics indicate that American credit debt totals $785 billion and this comes to an average of nearly $9,000 per household. Revolving credit card debt will lower your credit score and drain your saving or monthly cash flow because the borrower is paying interest on top of interest.  If your credit card debt is getting out of hand, now may be time to take a hard look at your spending habits and your options.

There are a several significant benefits to debt consolidation by means of home equity rather than simply making the minimum payments for your credit card payments. Credit cards are open-end loans, unlike home equity loans. Most home equity loans have fixed interest rates and are considered closed-end loans. Credit cards are revolving and credit cards have compounding interest. Home equity loans and lines of credit have mortgage interest that is tax deductible unlike credit cards where the interest isn’t tax deductible. Also credit cards are not secured by your home, which means higher interest rates and payments. The bottom line is that credit card debt ultimately costs you more money than a home equity loan.

There are many different second mortgage products available to consumers and with carefully consideration the right one may help you solve your debt problem. Find a reputable lender that you trust and discuss the available equity loan option that pertain to your credit score and qualifications. Refinancing and eliminating compounding interest debt with an equity loan or mortgage refinance can consolidate and reduce your payments.  In most cases, this will put you in a better position to find the path leading to debt freedom.