Pros and Cons of Paying off Credit Cards with a Home Equity Loan

It’s the American conundrum: House is purchased with Hard Work; Hard Work fills House with Love; Love and Hard Work go on shopping spree; Bye Bye House. We’ve all been there. Few of us are fortunate enough to live free of those little plastic devils spending all of our imaginary money: And those who successfully fend their siren-esque persuasions are doomed to a life time of ‘doing without’. So what do we do? Keep the flatscreens, new cars, and cheese wheels coming; while tucking their true expense firmly out of view in a thirty-year-a.r.m.-and-leg? Ahhhhh, a battle for a different day… Your house is already trimmed to the top with the luxuries that only visa and mastercard can provide. Now comes the day of reckoning: The piper wants his money all that’s left to do is figure out the best way to pay.
The first thought that comes to mind when deciding to pay off credit cards is to rip the band aid fast. With a couple of standard bank forms you can give up some of that hard earned home equity and receive a clean plastic slate in a matter of days. So why not? Well for one, do you think you have reached the end of your 60″-LCD-cravings? Or in five years will you find yourself in the same spot; selling another portion of your home back to the bank? For most of us, this is the reality. The best solution for most everything in life, with this being no exception, is to pursue the ever so dreaded cold turkey approach. In this, we are required to face the problem head on. No skirting around the reality of our addiction; our debt. No hiding the problem in an ever-more-convenient home equity loan. Cut spending to the point of poverty, put every red cent towards the plastic pirates, and in a year or so revel at the buried hole that was once a life lived beyond means.
“You’re missing the meat of the argument!” you say. “The purpose of using a home equity loan to pay off debt is simple math! Trade a higher interest rate for a lower one…” Sounds nice. Math that we learned in eighth grade swaddled cozily in its own logic. If ever I could make words jump off a page, I want it to be now. Wake UP! Those of us who spend ourselves into debt aren’t the people that will stop. Here’s the real math; the real, dirty, uncomfortable, math, that the providers of the little plastic devils don’t want you to know. Stretch ten thousand dollars at a lower interest rate for thirty years only accomplishes one thing: It takes off your chains and lets you shop again.