Equity Card UK
British consumers pay an astounding £179 million in personal interest every single day. Much of this is on high-interest credit cards and so many thousands of people are paying significant interest charges to their credit card providers every month.
If you’re looking for a way to reduce the amount of interest you pay on your credit cards, or if you’re simply looking to reduce your monthly outgoings to make your finances more manageable, a home equity loan could be the perfect answer.
Home Equity Loans – an Introduction
If you are a homeowner with equity in your property then a home equity loan could help you. A homeowner loan lets you borrow some or all of the equity in your home. It is generally separate from your main mortgage, and will often be through a specialist home equity loan provider.
Depending on your income and the equity in your home, you can typically borrow between £3,000 and over £100,000 over a term of 3 to 25 years. The lender will take a legal ‘charge’ over your home as security for the loan.
Home Equity Loans Can Help Lower Monthly Credit Card Payments
As your home is provided as security for the loan the lender has much more certainty that they will recoup their loan in the future. So, they can afford to offer low-interest rates for this type of home equity loan.
Conversely, credit cards often charge interest rates of between 15 and 20 per cent. You can often find that you are paying a significant sum in interest every single month as they are one of the most expensive ways to borrow money. In addition, thanks to the structure of minimum payments on credit cards, you will often find that your monthly repayments can be quite high.
So, using a home equity loan to consolidate your credit card debt can make a lot of sense for two main reasons.
Firstly, the interest rate charged on a home equity loan is likely to be much lower than a credit card for the reasons mentioned above. This will save you money in terms of your interest payments.
Secondly, as you can spread the repayments of a home equity loan over a long period, you can significantly reduce your monthly outgoings. This is the main way that home equity loans can help lower monthly credit card payments.
Bear in mind that if you spread your loan over a long period, you may end up paying more interest in total. This can be the case even if your monthly repayments are lower.
Securing a Previously Unsecured Loan
Bear in mind that when taking out a home equity loan to consolidate credit cards, you will be securing a previously unsecured debt.
If you fail to meet the repayments on your credit cards, the lender has to pursue you through the courts and you may end up with a poor credit rating. However, your assets are not at risk.
If you consolidate your credit cards by taking out a home equity loan, your home is provided as security to the lender. This means that your home is at risk if you don’t make the repayments on your home equity loan, which is not the case with credit cards.
To access the money tied in your home equity and get a great loan rate, book an appointment with the Mortgage Genie.