If you are asking the question "can a HELOC help pay off existing debt quicker," you may want to look at all your debt relief options before using a home equity line of credit. It is important that you realize that a home equity line of credit is secured with your home. Meaning that if you do not make your payments for whatever reason, your lender can start foreclosure proceedings on your home.
Yes, a HELOC can pay off your credit cards, but the debt is not paid off. It has been transferred to another loan. Using second mortgages to pay off debt is not a wise move for two reasons. First of all, most people that have credit cards and pay them off with another type of loan are carrying credit card balances again within a year. So, not only do they have a HELOC payment, but they are making credit card payments again.
Secondly, even if you do not use your credit cards again, the debt is now secured with your home. If you default on credit card debt, the worst thing that can happen is your credit will be negatively affected and collectors will call you on a regular basis. If you stop making payments on a HELOC, as I said earlier, foreclosure is a possibility.
If you have debt that you would like transfer to a lower interest rate, you may want to consider opening a credit card that has an introductory rate for 6 months to a year. But here again, you will have available credit and it will be tempting to use it.
For most people that feel their debt is getting out of control, credit counseling or debt settlement is a better debt relief option. These are both plans that allow you to eliminate your debt without leaving you with the temptation of available credit to charge on again.
To the question, can a HELOC help pay of debt quicker, the answer is yes. But is it a smart move? The answer is no. Find out how you can find solutions to credit card debt without another loan.
By Marjorie Salada who blogs at www.debtmanagement1.com
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