3 reasons to use a HELOC to pay your credit cards off right now
You may be looking for ways to cut your interest costs on your credit card debt. With average interest rates on these accounts currently over 20%, carrying balances from month to month can get expensive. But, cutting your interest rate could result in lower monthly payments and a lower overall cost to pay your debts off.
Home equity lines of credit (HELOCs) are one effective way to do so.
HELOCs are financial products that can give you access to the funding you need while using your home as security against what you borrow. With your home as collateral, financial institutions typically charge significantly lower interest rates on these products than on unsecured credit lines like credit cards. And, there are multiple reasons to consider using a HELOC to pay your credit card debt off in today's economic environment.
Pay your high-interest debt off with a HELOC now.
3 reasons to use a HELOC to pay your credit cards off right now
If you want to save money on your credit card debt and get out of debt faster, consider opening a HELOC. Here are a few reasons why you should use a HELOC to pay off your credit card debt right now:
HELOC interest rates are usually lower than credit card rates
"It would make sense to utilize a HELOC to pay off high-interest debt in today's environment if the math worked," explains John Jones, investment advisor representative at the financial planning firm, Heritage Financial. "It may make sense to use a HELOC at a lower interest rate to pay off the higher interest debt."
Credit card rates are substantially higher than the average HELOC interest rate, which currently sit at 9.17%. So, you could cut your rate by over 10% by paying your credit card debt off with a HELOC. And, that means you could realize significant savings both in what you pay monthly and over time.
Take advantage of today's competitive HELOC interest rates now.
HELOCs come with variable interest rates
While HELOCs typically offer lower interest rates than credit cards, their interest rates are variable - as is usually the case on credit card accounts. But, that could be a good thing in today's economic environment.
Inflation is slowing down, and it may continue doing so. If that proves to be the case, the Federal Reserve may cut its federal funds rate soon - which could be followed by reductions in the interest rates consumers pay to borrow money. So, your HELOC's interest rate could fall if overall rates start to come down.
Most homeowners have plenty of equity to work with
If you own your home, you probably have all the equity you need to pay your credit cards off. While the average American has $7,951 in credit card debt, if they own their homes, they have an average of $206,000 in tappable equity available now. So, even if you owe substantially more than the average American does to credit card companies, you may have plenty of equity in your home to pay your debts off - and save money in the process.
Use your equity to get out of debt today.
The bottom line
If you have high-interest credit card debt that you make monthly payments on, and own your home, you could cut the cost of your debt. Simply open a HELOC and use the credit line to pay your credit card debt off. Not only should you have plenty of equity to use, HELOCs typically come with lower interest rates than credit cards. And, with variable rates, the cost of your HELOC could drop over time. That's especially true when you consider the current state of the economy. Compare your HELOC options today to pay off your high-interest credit card debt.
