Using A Home Equity Loan To Tackle Credit Card Debt: A Guide

If you are a homeowner with credit card balances piling up, tapping into the equity of your house could help you break the relentless crush of sky-high interest rates. However, while using a home equity loan to pay off credit cards is an option for some, it’s not the right solution for everyone.

Before you lean on your home equity, it’s useful to get familiar with the mechanics of this option and the risks to be aware of.

Home Equity Loans, Explained 

A home equity loan is a type of second mortgage that allows you to tap into the equity you’ve built in your home. As a homeowner, you build equity through your down payment, each monthly payment and increases to the property’s value.

When you take out a home equity loan, you will receive a lump sum of cash. You can use the funds in almost any way you see fit. But you’ll be expected to make fixed monthly payments to repay the loan. This payment is in addition to your monthly mortgage payment.