Dec
29
How To Pay Your Credit Card Bills Faster
Many people who are deep into credit card debt think of using their home equity to pay off their loans. This can be either good or bad depending on how good you are at managing money. The three main benefits of doing this are:
1. Reduced interest rates.
The interest rate on your home equity account will be three, four, or more percent cheaper than the interest rate on your credit card. This lets you keep more of your money in your pocket.
2. Pay off your loan quicker.
Since you have a lower rate of interest,, you will be able to liquidate your debt a lot quicker. For instance, let’s say that the annual interest rate on your credit card is twenty percent and you own $5,000. If you manage to pay off the balance in 12 months, you’ll have paid $5,558 total. If, however, you transfer your debt to your 5% home equity loan, you can pay this debt off in just 11 months.
3. You simply end up paying less money.
Using the same scenario as above, with the credit card interest rate, you’ll pay $5,558. but with the lower home equity rate, you’ll only pay $5,138, nearly 9% less. And the bigger the amount of your credit card debt, the more you benefit by transferring your balance.
That doesn’t mean that you should immediately transfer your credit card balances to your equity account. In some cases, this would be a disastrous idea. The important thing is to simply take stock of all the options you have when paying off a debt.
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