Attention: Please read this article until the end.
A Home Equity Line of Credit, or HELOC as we will refer to it, is an amount of credit that we extend to a homeowner based on their credit history and the value of their home. A HELOC differs from a mortgage in that you will only pay interest on the money you draw from your line of credit. For example, if you accept a HELOC of $10,000 and never draw from it, you will not have to pay any interest. If you choose to take $5,000 from your HELOC, that you will pay back $5,000 with interest.
Wait, wait, wait. I know what you you’re thinking. Whoever, is writing this article must be taking advantage of the recent legalization of a certain green substance in Colorado. How can you pay off debt, by taking on more debt? Great catch.
The advantages of getting a HELOC is that by using your home as collateral, you will receive a considerably lower interest rate than with the credit card where your debt is now. At the time of this writing we are offering a HELOC with amazingly low rates based on the prime rate plus 0 points (based on current Loan to Value (LTV) and your credit history.) At 3.25% (as of 9/12/14) that is insanely low! What is the interest rate on your credit card? 20%? 25%? 30%? More?! Even our Visa Platinum Select without rewards credit card is 6.75% which is still double the rate of a HELOC.
By using a HELOC to pay off debts with higher interest rates, you can save a lot of money in interest, and pay off your debts faster. To make things even more convenient, we offer the HELOC on a Visa card so you have access to it on the go. No waiting for a check and no waiting for approval.
IMPORTANT! DO NOT STOP READING.
The dangers of using a HELOC to pay off debts.
A Home Equity Line of Credit is an extremely powerful privilege. And like any powerful privilege such as yielding the Excalibur,captaining the Starship Enterprise, or having the power to read minds, a HELOC requires great self-control and responsibility. The danger of using a HELOC to pay off debt is that a HELOC, by definition, is a line of credit. This adds to your total amount of available credit, thus creating the opportunity to go further into debt. Unlike a credit card which is an unsecured loan (the reason credit card interest rates are so high are because they are unsecured) a HELOC is backed by the value of your home. This means that defaulting on payments on your HELOC may result in foreclosure! See more details regarding a RMLEFCU HELOC on our website.
The best way to learn whether a HELOC is right for you is to talk with one of our banking specialists. As a member of the Rocky Mountain Law Enforcement Federal Credit Union, you are entitled to honest advice and quality customer service. If a HELOC is not the best way for you to pay off debts, we may have something else to help you. For example, a credit card balance transfer. Click here to learn more.