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What are the major drawbacks with getting a Home Equity Loan on a mortgage to pay off credit card debt?

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Tameeka asked:


We’re in our 50’s, with a house that’s worth twice of what’s left to pay off on our mortgage. We were hoping to use the equity for our son’s college in a couple of years, or as a retirement cushion, but want to pay off some MAJOR credit card burdens. Any advice?

Raymond

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This entry was posted on Saturday, May 24th, 2008 at 1:29 pm and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

7 Responses to “What are the major drawbacks with getting a Home Equity Loan on a mortgage to pay off credit card debt?”

  1. ra63 says:
    May 24, 2008 at 3:16 pm

    The danger is you borrow on your house - pay off the credit cards and then assume more credit card debt.

  2. BosCFA says:
    May 27, 2008 at 10:13 am

    Bad idea…

    If you don’t pay back your credit card, they can’t repossess anything, but if you don’t repay your Home Equity Loan, they repossess your house.

  3. zaphodsclone says:
    May 29, 2008 at 12:17 pm

    Transfering one type of credit for another is not the solution.

    Read his info, listen to his show, become filthy stinkin rich and debt free.

    Good luck

  4. sic-n-tired says:
    May 31, 2008 at 8:10 pm

    by doing so, you should be able to pay substantially lower interest. also the interest on a mortgage may be tax deductible.

  5. Wango138 says:
    June 1, 2008 at 8:03 pm

    First off, you will lose equity in your home. This becomes a big deal if you need to sell, or if the home values drop.

    Second, you are taking a short term debt and making it long term. However, this may still be beneficial overall, depending on cash flow, long term plans, equity position in the home, and a host of other factors. It is up to you to sit down and determine what is best for you.

    I suggest you go to the link I provided in the source and find the article most suited to you.

  6. spifiman1 says:
    June 4, 2008 at 6:50 pm

    It’s a great idea. I did the same thing a couple of years ago and lowered my monthly payment by several hundred dollars. Paid the loan off early and saved a ton on interest by paying less for the equity loan and being able to write off the interest on my taxes. Just be sure that you don’t make the loan for over 60-months.

  7. heybulldog says:
    June 7, 2008 at 4:21 pm

    Bad idea.

    1. you put your house on the line. If something happens and you can pay goodbye house.

    2. Home equity loans can be called due at anytime. If the bank thinks you are getting to far in debt they can call the loan due.

    3. I doesnt solve the problem just moving the debt around.

    listen to daveramsey.com he has a radio show that you can listen to on his site or find a radio station to listen too. He also keeps 10 days in archives. Lots of good advice.

    Good luck!

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