How much would you save by using home equity to pay off $20,000 in credit card debt?

If you are dealing with five-figure credit card debtyou may have heard that your home equity could offer you low cost way to repay debt. Home Equity Loans And Home Equity Lines of Credit (HELOC) typically offer lower interest rates than credit cards which could lead to big savings in the long run.

But how big could these savings be?

Say you have $20,000 in credit card debt. How much would you like save using a home equity loan or HELOC to pay off this debt? This answer depends on the interest rate of your home equity loan or HELOCTHE duration of the loan or line of credit and whether or not your interest is the rate is fixed or variable. Below, we’ll calculate how much you’d save by using your home equity to pay off $20,000 in credit card debt.

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How much would you save by using your home equity to pay off $20,000 in credit card debt?

The amount of money you would save by using your home equity to pay off $20,000 in credit card debt depends on your interest rate, your term and the type of financial product you use. Below we will calculate what your savings could be with three Popular Home Equity Loan Options. Keep in mind that credit card interest rates are variable and may change from time to time. These figures assume that your credit card interest rates remain the same throughout the repayment periods mentioned:

Here’s how much you’d save with a 10-year home equity loan

THE average interest rate over 10 years for a fixed home equity loan is currently 8.77%. If you used this type of loan to pay off $20,000 in credit card debt, your monthly payments would be $250.87 and you would pay a total of $10,104.25 in interest over the life of the loan. This brings your total repayment cost to $30,104.25 over 10 years.

The average credit card interest rate is currently 20.71%. If you owe $20,000 in credit card debt at an interest rate of 20.71% and want to pay it off in 10 years, you will pay $395 per month ($144.13 more per month than ‘a 10-year home equity loan). You’ll also pay $27,516 in interest ($17,411.75 more than a 10-year home equity loan), for a total repayment cost of $47,516 over the 10-year period.

Find out now how much more affordable a home equity loan is than your credit card debt.

Here’s how much you’d save with a 15-year home equity loan

The average interest rate for 15-year fixed home equity loans is currently 8.76%. At this rate, your monthly payments on a 15-year $20,000 home equity loan would be $200.01. And you would pay a total of $16,001.41 in interest over the life of the loan, for a total repayment cost of $36,001.41.

If you wanted to pay off a $20,000 credit card balance with an average interest rate of 20.71% over 15 years, you would have to pay $361 per month ($160.99 more per month than a loan on home value over 15 years). You’ll also pay $45,123 in interest ($29,121.59 more than a 15-year home equity loan), for a total repayment cost of $65,123.

Here’s how much you’d save with a HELOC

HELOCs generally have variable interest rates. Therefore, your rate is likely to change throughout the repayment period. Additionally, you do not have to make any payments on your principal balance during the period HELOC draw period (usually the first five to ten years). Instead, you’ll typically have to make interest-only payments during this time.

Given the unique nature of the HELOC draw period and its variable interest rate, it would be difficult to determine exactly how much money you could save by using one of these financial products to pay off your credit card debt. credit with long-term certainty.

On the other hand, it is worth noting that the average HELOC interest rate is currently 9.07%. So, if you started paying off your HELOC as soon as you used it to eliminate $20,000 in credit card debt, with the goal of completely paying off your HELOC in 10 years, you would pay $254.11 per month ($140.89 less than you would have made). paying off an average credit card monthly to pay off a $20,000 balance in 10 years). You would also pay $10,493.18 in interest in the process of paying off your debt ($17,022.82 less than you would pay on the average credit card).

Again, it’s important to keep in mind that credit cards and HELOCs offer variable interest rates that may change several times over a 10-year repayment period.

Talk to a home equity loan expert to find out which product is best for paying off your debts now.

The essential

Using your home equity to pay off $20,000 in credit card debt can result in savings ranging from $140.89 to $160.99 per month. Over the repayment period, you could save between $17,022.82 and $29,121.59 in interest, depending on how you choose to leverage your home equity to pay off your credit card debt. making it a viable alternative for many borrowers today.

Pay off your credit card debt with your home equity now to take advantage of these savings.