How to Use an Equity Loan to Pay Off Debt

Series Summary

Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings, specifically property that is stationary, or fixed in location. With the development of private property ownership, real estate has become a major area of business. Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate industry has evolved into several distinct fields. Specialists are often called on to valuate real estate and facilitate transactions. In this free real estate video series, a licensed agent discusses buying and selling homes. As a home buyer, learn about inspections, appraisals, making offers and buying from the owner or with poor credit. As a seller, find out how to sell a home online or without a real estate agent, and also how to prepare the home for open houses. Real estate can be a tricky business, but with the right information, buying a selling homes is simple and profitable.

Video Transcript

"Using a home equity loan to pay off your debt can be risky business. I'm Richard Blake and I'm here to explain how to use a home equity loan to pay off your debt. I don't recommend ever using a home equity line to pay off your debt, unless it's absolutely necessary. Unless you're just over your head in debt, and you need to consolidate it, and get your interest payments down more so than what they currently would be if you didn't do so. One of the risks involved are, you're actually borrowing money for depreciating assets, as well as interest rates that continue to accumulate. Your home is a pretty sound investment over time, and you're really losing that investment when you start using it to borrow against depreciating assets. Nonetheless, it can be an option for certain people who need it. And what you do is, is the equity that is built into the home, you can then pull that out from your bank. So for example, if you purchased a home for 200 thousand dollars, and you've owned it for 10 years, and now it's worth 300 thousand dollars, you can go to your bank, ask them for an equity loan, and that difference is going to be a 100 thousand dollars that they're going to give you at an interest rate of whatever the current mortgage rates would be. So your credit card debts, you know the interest rate there may be 20, 25 percent. Whereas, on your home equity loan it's only going to be 6 percent. So you can use that 100 thousand dollars to pay off these credit card bills, and have a much lower interest rate involved. Okay? I'm Richard Blake, that's a little bit of how to use a home equity loan to pay off your debt. I hope that helps you. Have a great night."