How to use Heloc to pay off (and when it is logical)

Did you overcome credit cards, personal loans or medical bills? Depending on your financial position, the use of a HELOC credit line to pay the debt is a smart step.

However, it is very important to understand how debt payment or merge with Heloc to determine whether it is logical to you.

. It works like a credit card with a rotating credit line, unlike the traditional mortgage or a personal loan, which gives you a lump sum of money. Heloc gives you money for almost anything, such as large purchases, home improvements, or debt unification.

Most Helocs have changing interest rates, although some lenders offer . HELOC’s annual percentage rates are usually much lower than credit card rates. Therefore, although they have some same features as a credit card, they can be more affordable and actually help you pay the debts of credit cards.

To pay the debt using Heloc, you need to understand how to qualify and the rules that you must follow. Below are the basics to get Heloc and use money to pay other debts.

Heloc lending usually searches for home owners between 15 % to 20 % in their home. Arrows are the value of your home minus the outcome of the distinguished mortgage. This means that you are more likely to agree if your mortgage balance ranges from 80 % to 85 % of the value that has been evaluated in your home. For example, if one of the appraisals claims that your home is worth $ 400,000, the mortgage manager should be a maximum of $ 320,000 to $ 340,000. If your balance is higher, you will not qualify for Heloc.

You will also need to meet the basic requirements of the borrower, such as the presence of a low He entered stable, and the date of payments on time.

There are two main stages of Heloc.

• The period of clouds: You can reach a lot of credit line or less than the credit line that the lender agreed to during the withdrawal period, which usually lasts up to 10 years. During this time, it is usually required to pay the minimum payments only on the amount you pull (although you can pay more). During this period, you can withdraw money as needed to pay medical debts, credit card bills or other important debt payments.

• Payment period: In the payment period, the minimum will increase you to cover the benefits and the manager until the balance prevails. The payment period usually lasts for 20 years, and you can no longer withdraw money during this time.

Understanding risk

Helocs are guaranteed loans that use your home as a guarantee. Warmed loans are less dangerous for lenders because if the borrower cannot pay the debt, the lender can seize the home.

Warmed loans can be more dangerous for borrowers. If you are fighting for monthly payments on both Heloo and Mortgage, it can enter your home . Therefore, although Heloc can help you get out of the debt, you just keep this option if you are confident that you can keep up with the loan payments. You do not want to lose your home in an attempt to pay off the unprecedented debt, such as a credit card or a personal loan.

There are many benefits for Heloc, especially if you are dealing with high interest debts. Below are some positives to consider.

• Low interest rates: Heloc interest rate . It will provide you with the use of a lower interest credit line to pay the higher interest debts money on interest payments.

• Reasonable prices: During the first decade or so, you can usually make interest payments only on your Heloc. This can be more expensive than minimal payments for other borrowing methods.

• Credit use may improve: It indicates the percentage of your available credit you use. The lower your use rate, the better. For example, it is better to be your credit score if you owe $ 1,000 on your credit card with a $ 10,000 if you owe $ 9,000. Fico’s credit model usually does not include Helocs when calculating the use of credit. (However, other registration forms may be.)

• Simplified payments: Simplification of multiple credit card payments to Heloc payments can easily manage your money.

Before using Heloc to pay other loans, consider these possible negative aspects.

• It requires enough shares at home: You may have difficulty qualifying for Heloc if you don’t have at least 15 % of the shares in your home.

• It may come with closing costs: If the lender is charged You can pay 2 % to 5 % of the credit limit.

• Changing interest rates: It may be difficult to determine the budget to pay a variable rate because the batch can change periodically.

• Failure to pay can be risked by the house of the house: Your home is guaranteed with Heloc, so if you are having a problem in paying it, the lender can return your home. There can be consequences for not paying your credit card, personal loan, or student loan bills, but because these types of debt are not guaranteed, companies cannot rob things like your home.

Low interest rates are one of the largest Heloc, which makes it a strong choice for people with high interest debts.

“At any time you can unify the debts by interfering in a loan at a lower interest rate, it can put you in a better financial position,” said Dre Torres, loan official at Cornerstone Vers. “HELOC savings can help you get a positive monthly cash flow or pay other debts.”

However, the struggle to pay Heloc has severe consequences.

“Heloc is associated with your home, so nothing you want to take lightly. Make sure you are a financially diligent and do not return to debt,” Torres pointed out. “If you lack a solid budget or suffer from bad spending habits, Heloc is a generally bad idea.

There are other ways to unify debt if Heloc is not suitable for you.

• Home Arrow Loan: Access to your home shares in a cut amount, usually paid at a fixed interest rate.

• Critical re -financing: More than the current real estate mortgage if you have enough shares. And its use to pay the debt.

• Personal loan: You can borrow a cut amount to unify or pay the upper interest debts and pay it at a fixed rate, usually within five to seven years.

• Credit card transfer: Transfer of high -benefit debts to a It can save you money if you can pay the balance before the end of the use period. It usually needs good credit to excellent to qualify.

• Credit consulting programs: Some non -profit agencies can help you negotiate more payments at reasonable prices with your creditor if you are struggling to stay on borders.

Heloc to pay the debt can be a good idea if you have a high interest credit card debt. Helocs tend to get lower prices than credit cards because they are guaranteed by your home. But this also means that you may lose your home if you are struggling to pay the balance.

Heloc usually appears on your credit report. As with other credit accounts, lost payments can harm your degrees. Heloc can also affect your credit. Although Fico does not include Heloc in your use account, other credit -degree models may.

You can use Heloc or Home Equity loan to pay high -benefit debts. Both use your home as a guarantee. Helocs usually come with changing interest rates. Home stock loans have fixed rates, making them more predictable. Heloc payments may be more affordable if you choose interest payments only during the withdrawal period. However, your payments will increase significantly when the cloud period ends.

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This article has been edited.