Your HELOC Debt Consolidation Loan
You can use a home equity line of credit or HELOC for whatever purposes suit you. Buy a car, pay for a vacation, or use it to consolidate your debt. Yes, a HELOC can act as a debt consolidation loan offering to you many benefits not found in a traditional debt consolidation vehicle. Read on and we'll examine the big advantage to using a HELOC as a way for you to control your debt.
If you have a sizeable amount of debt and you want to control your expenses, then you know that you have several options available to you to pull all of your debt together. Perhaps you have considered tapping your retirement fund, or maybe springing for one of those balance transfer zero percent credit cards.
On the surface, both options seem great but you will have to repay your retirement loan or face penalties while a balance transfer credit card may only let you transfer a small amount of funds. This doesn't do you any good if your debt exceeds $25,000!
Instead, consider a HELOC for consolidating debt. For example, if you owe approximately $25,000 for two credit cards and one installment loan you could tap your HELOC and pay off these debts immediately. Instead of interest rates of 17.4% and 14.9% on your credit cards and 11% on your installment loan, you could combine all three debts and be left with a HELOC interest rate of 8 or 9 percent.
Should you decide that you want to lock in a low rate you simply convert the HELOC to a fixed rate home equity loan and your monthly payments will be set for the term of the loan.
Even better, a HELOC is tax deductible on the federal level and it could be a tax deduction in your state too. Thus, you receive a lower rate, you pay off your high interest accounts, and you receive a tax deduction which effectively lowers your HELOC cost.
A HELOC could be the effective debt consolidation tool you need to take control of your finances. In order to qualify for a HELOC you must own a home, your home's equity must be large enough to warrant a loan, and your credit score must be good. Should you meet all of the requirements then consider a HELOC to help you in your quest to overcome your debt.
If you have a sizeable amount of debt and you want to control your expenses, then you know that you have several options available to you to pull all of your debt together. Perhaps you have considered tapping your retirement fund, or maybe springing for one of those balance transfer zero percent credit cards.
On the surface, both options seem great but you will have to repay your retirement loan or face penalties while a balance transfer credit card may only let you transfer a small amount of funds. This doesn't do you any good if your debt exceeds $25,000!
Instead, consider a HELOC for consolidating debt. For example, if you owe approximately $25,000 for two credit cards and one installment loan you could tap your HELOC and pay off these debts immediately. Instead of interest rates of 17.4% and 14.9% on your credit cards and 11% on your installment loan, you could combine all three debts and be left with a HELOC interest rate of 8 or 9 percent.
Should you decide that you want to lock in a low rate you simply convert the HELOC to a fixed rate home equity loan and your monthly payments will be set for the term of the loan.
Even better, a HELOC is tax deductible on the federal level and it could be a tax deduction in your state too. Thus, you receive a lower rate, you pay off your high interest accounts, and you receive a tax deduction which effectively lowers your HELOC cost.
A HELOC could be the effective debt consolidation tool you need to take control of your finances. In order to qualify for a HELOC you must own a home, your home's equity must be large enough to warrant a loan, and your credit score must be good. Should you meet all of the requirements then consider a HELOC to help you in your quest to overcome your debt.