Debt payoff with home equity loan? Weigh the pros and cons first
If you're considering using a home equity loan to pay off debt, there are some things you need to weigh first. The biggest factor to consider is whether or not you'll be able to afford the payments on both the home equity loan and your existing debt.
On the plus side, a home equity loan can be a lower interest way to pay off debt. And, the interest you pay on a home equity loan may be tax deductible (consult a tax advisor to be sure). On the downside, you're putting your home at risk if you can't make the payments.
Before taking out a home equity loan to pay off debt, here are some things to consider:
-Can you afford the payments?
-What is the interest rate on the home equity loan?
-Is the interest rate on the home equity loan tax deductible?
-How much equity do you have in your home?
-What is the loan-to-value ratio on your home?
-Are you comfortable putting your home at risk?