Three-Step Guide on How to Pay Off Credit Cards using a Home Equity Loan

3-Step Guide on How to Pay Off Credit Cards using Home Equity Loan

If you are struggling with credit card debt, your home could be your savior. A home equity loan can help you pay off the expensive credit card debt. A home equity loan is a loan that is secured against the equity (the extent of ownership) you have in your home. Since the home equity loan interest is much lower than the credit card APRs, it makes a lot of sense to use home equity loans for paying off credit cards.

So, here is a 3-step guide on how to pay off credit card debt using home equity loan:

Step#1: Home Equity Calculations

The first step is to calculate your home equity. Your home equity is calculated as: appraised value of home minus the outstanding principal on your mortgage loan e.g. if your home is appraised at $100,000 and the outstanding principal amount on your mortgage is $60,000, your home equity would be $100,000 – $60,000 = $40,000.

However, the mortgage lenders calculate the home equity loan eligibility using their own formulae e.g. some lenders will equate the loan eligibility amount as 80-90% of the appraised value minus the outstanding principal on your mortgage. Again, based on your credit rating, age, and overall financial profile, the mortgage lenders might approve a higher or a lower home equity loan.

Check the home equity loan interest rates with your mortgage lender and get a quote for home equity loan. You can also approach other mortgage lenders and explore further options.

One good way to check the best deal is to use websites like http://www.estreetloans.com. Such websites have a huge network of mortgage lenders and you can easily get the best home equity loan quotes and that too in real quick time. They compare various options and help you zero-in on the one that is best for you.

Step#2: Check your finances

Once you have the home equity calculations and the best mortgage quotes handy, you will know what amount you can borrow as home equity mortgage loan.A home equity loan will help you save a good amount of money because you are substituting high interest debt (credit card debt) with low interest debt (home equity loan). Still, you will need to check your finances to determine if you will be able to meet the monthly obligation for your home equity loan. Also keep in mind any big-ticket personal expenses that might be expected in near future.

If the required monthly payment on your home equity loan is still too much for you, you can go back to the mortgage lenders and explore the possibility of mortgage refinancing or restructuring in order to get extended payment schedules (and/ or better interest rates). This might help bring down the monthly payment on your mortgage either in the short term or in the long term.

Step#3: Seal the deal and control your spending

Once you have the deal that you were looking for, just get your home equity loan and pay off your credit cards. And take a sigh of relief! However, this doesn’t mean that you can continue spending the way you were doing before. You should control your spending to ensure that you don’t get into the debt trap again.

And you can use websites like estreetloans.com for quality advice on home mortgage loans (including adjustable rate mortgages and fixed rate mortgages), home equity loans, payday loans, personal loans, auto loans, credit card debt relief and much more.

Three-Step Guide on How to Pay Off Credit Cards using Home Equity Loan

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