One of the most popular uses for home equity loans is debt consolidation. By consolidating all your debt, you gain the freedom of replacing multiple payments with one monthly payment. Because the rate you’ll pay for your home equity loan is typically lower than for a credit card or personal loan, you may be able to reduce monthly payments by up to 10%3. Know your payments will stay the same each month with a Fixed Rate Home Equity Loan (FRHEL). Or take advantage of the flexibility of a Home Equity Line of Credit (HELOC), which typically offers a lower up-front rate and access to funds whenever you need it.
Home Equity Line of Credit
Have too many bills to juggle each month? Are your credit card interest rates a little too high? Are you finding that affording the minimum payments is absorbing too much of your monthly pay? If that is the case, then a home equity line of credit is ideal for your situation. With a home equity line of credit you can:
- Pay less per month. With interest only minimum payments during the draw period,1 you can use loosen up your monthly obligations.
- Reduce your taxable Income. Your interest paid with a Home Equity Loan can potentially be 100% tax deductible. †
Fixed Rate Home Equity Loan
A home equity loan has a fixed rate. It's also called a fully amortized loan - amortized simply meaning that your principal and interest payments are spread over the life of the loan. So you have a fixed, set payment each month that stays the same for the life of the loan.
- Have a structured payment plan. Know when your debts will be paid off by establishing a fixed payback term.
- No more variable rates. Move your credit cards over from a variable interest rate to a fixed rate.
- Create One Bill. Save yourself the headache of managing several payments, and roll all of your debts into one easy loan.
- Reduce your taxable Income. Your interest paid with a Home Equity Loan can potentially be 100% tax deductible. †
Other Ways to Use Your Home’s Equity
1 Interest-Only payments: If you choose to pay only the amount of interest due, then at the end of the interest only period you will still owe the original amount you borrowed and your monthly payments will increase because you must pay back the principal as well as interest. Your payment could increase even more if your variable interest rate increases.
3 Debt Consolidation: Payments and total savings will vary depending upon the amount, terms and interest rates relating to the existing debt actually consolidated by you. You should take into consideration that certain short-term debts may be consolidated into longer term debts that may result in larger total interest payments.
† Consult a tax advisor regarding the deductibility of interest.
