When it comes to paying off credit card debt you may think it’s wise to do so by any means necessary, including tapping into your home equity. Often times getting a home equity loan can seem like a relatively cheap source of money at your disposal. However, by doing so you can be putting your home at risk should you not be able to make the payments. Not to mention, if you have a habit of spending more than you make, you could actually end up putting yourself into even more debt down the road. Here are a few questions to ask before taking out a home equity loan to pay off your credit card debt.

Is This a Means to an End?

If this isn’t the only debt that you’re currently off, have you fixed the issues that caused you to overspend? If overspending is still an issue, and you always seem to have too much month left at the end of your money, then taking out a home equity loan could be just like putting a band-aid on a bullet hole. Before borrowing against your home, make sure that you aren’t just setting yourself up to go further into debt.

How High Could Your Payments Be?

It’s important to know that there are three ways to tap into your homes equity: a home equity line of credit (HELOC), a home equity loan, and a cash-out mortgage refinance. Typically, lines of credit have variable rates and although they may be low to begin with, they can climb over time. Most loans have fixed rates and anywhere from a five-year to a fifteen-year payback period. Cash-out refinances can have either variable, fixed, or even hybrid rates and most often the terms range from fifteen to thirty years. Take the time to figure out what the worst-case scenario payment would be for each of them so you have a good understanding on just how much you could be expected to pay.

How Long Will It Take to Pay Off?

If you’ll be able to pay off what you owe in less than five years, then a HELOC may be your best bet because they’re relatively cheap to set up. If it will take longer than five years, you will most likely want the fixed rates and payments of a home equity loan. Cash-out refinances should be your last choice because of the closing costs that come with them and the fact that they change the rate on your mortgage.

If you’re able to avoid using your home equity as a means to pay off your credit card debt, then you should do so. Although some of the options are less expensive than others, you are still putting your home at risk. Try to look into other options of getting the money needed such selling non-retirement investments or taking out personal loans with fixed rates.

If you find yourself struggling with debt or would like to find out about becoming debt free, call Debthelper.com at 800-920-2262, or visit @ www.debthelper.com.