The Update

Should I Take Out a HELOC to Pay Off My Credit Card Debt?

Your home’s equity can be a flexible financial tool but using it to pay off credit card debt can be risky. Let’s look at the pros and cons of this financial move so you can make an informed decision.

Pros of Using a HELOC to Pay Off Credit Card Debt

Here are some of the pros of using a HELOC to pay off credit card debt:

• Favorable interest rates. Interest rates on HELOCs tend to be lower than interest rates on credit cards.
• Potential tax benefits. The interest payments on a HELOC may be tax-deductible if the funds are used to increase the value of the home (consult a tax pro).
• Streamlined monthly payments. When you consolidate your credit card debt to a single loan, it’s easier to keep up with the monthly payments.

Cons of Using a HELOC to Pay Off Credit Card Debt

Here are some of the cons of using a HELOC to pay off credit card debt:

• It uses your home as collateral. Defaulting can mean losing your home.
• You may end up in even more debt. If you don’t change your habits, transferring your debt to a HELOC can land you in deeper debt.
• Fluctuating interest rates. The APR on most HELOCs will fluctuate along with the market rate.
• Extended repayment terms. HELOCs can have repayment terms of 10 years or longer.

Before Using a HELOC to Pay off Credit Card Debt

If you decide to take out a HELOC to pay off your credit card debt, first consider these factors:

• Your debt repayment strategy. Evaluate your spending habits and assess whether a HELOC will help you address the underlying causes of your credit card debt. Develop a realistic debt repayment strategy and a plan to avoid incurring additional debt.
• Financial stability. Examine your income stability, employment prospects and financial goals.
• Loan terms and fees. Thoroughly research and compare HELOC offerings from different financial institutions.

RGCU HELOC

Are you looking to tap into your home’s equity with a HELOC? Contact Rio Grande Credit Union today to get started. Our favorable rates, generous eligibility requirements, and easy terms, make a Rio Grande Credit Union HELOC a great choice.