A home equity loan gives you another option for financing big ticket items at a lower interest rate. Consumer debt is
single largest reason why consumers try to get a home equity loan. There are many ways for average American family to buy more and spend more on credit. All it takes is one small regular monthly payment to keep process going. So how do you know which items are manageable on your existing salary, and which items might be better financed with a home equity loan?
The key idea is that debt should be large, high interest, and be a one time or infrequent charge. If you use these three key items to measure effectiveness of getting a home equity loan, you can pay off your debts and avoid a relapse which is very common for consumers with massive debt.
One of most popular reasons for getting a home equity loan is to pay off large credit card debts. If you plan to pay off any kind of revolving debt, try to limit amount of cards or credit limit that you will have available after you pay off your debt.
Once credit cards are clear, if there is no change in your spending habits, you can easily rack up more credit card debt on top of home equity loan that must be repaid. If this happens then it might be time for some professional help to manage your budget or extensive credit counseling.
The second criteria is that debt should be a one time or infrequent debt. Another popular use of a home equity loan is to finance home improvement projects. This seems like a good idea because an investment, especially an improvement in aesthetics and features of your home can lead to a dramatic increase in value of your property.
