2. Use Your Home Equity
Thanks to a rebound in the housing market, homeowners are starting to get back some of the value in their homes that was lost due to the great recession.
If you’re sitting on several thousand dollars’ worth of equity, you could easily take out a home equity loan or line of credit and zap all of your high-interest credit cards or remaining student loans.
It’s convenient to be sure, but it’s not without certain drawbacks.
Using a home equity line means you’re simply exchanging one type of debt for another. While home equity loans and lines of credit tend to carry lower rates than credit cards, that doesn’t guarantee that you’re going to save any money in the transaction.
If the loan has a variable rate or you’re only required to make interest payments for a set period of time, you may not make much progress if you’re not committed to dumping it as quickly as you can.
The other possibility with a home equity loan is that it could cause you to double up on debt if you end up building big balances on your creidt cards again.
If you get so financially stretched that you can’t keep up with the payments on the home equity line, it could end up costing you your home if the lender decides to foreclose.