Should I take out a home equity loan to consolidate debt?

As a homeowner, one of your greatest assets is your home’s equity, or the percentage of the property that you truly “own”. Unlike credit cards and/or unsecured loans which typically offer higher interest rates to offset the lack of collateral, by using your home as collateral, you can get a great low rate on a home equity loan that you can use to consolidate debt.

With a home equity loan from DuPage Credit Union, you can borrow up to 90% of the value of your home on amounts of $10,000 – $1,000,000. Plus, no prepayment penalties—so you can pay it off as quickly as you need to.

Pros of a home equity loan for debt consolidation:

  • Lower rates than an unsecured loan or line of credit
  • Tax benefits if the loan is used to make home improvements*
  • Flexibility to use your equity however you need to
  • More funds than a credit card or personal loan

Cons of a home equity loan for debt consolidation:

  • You risk your home by using it as collateral
  • Closing costs and fees may be included

Home equity loan vs home equity line of credit (HELOC)

The biggest difference between a home equity loan and a HELOC: you’ll receive one lump sum upfront with a Conventional Home Equity Loan, whereas, with a HELOC, you can draw on the line of credit when you need it—similar to how a credit card works. Other key differences:

Home Equity

  • Fixed-rate 5-10 year repayment term
  • Variable-rate 20 year repayment term
  • No annual fee
HELOC

    • Variable interest rates
    • Up to 10 years to draw, 20 year repayment term
    • Annual fee (waived the first year)
    • You only make payments on the amounts you draw
    • Prepayment penalty fee

Other choices to consolidate debt

Maybe a home equity loan isn’t in the cards right now, or the amount you’re hoping to consolidate isn’t enough to warrant using your home as collateral. There are two other debt consolidation options that will get the job done.

Personal loan for debt consolidation

We understand that unexpected expenses pop up. Maybe it’s an emergency repair or a doctors visit. With a personal loan, you’ll get rates as low as 4.99% APR1 for 24 months and the funds will be available in less than 24 hours. Plus, you can defer your payments for the first 90 days,2 reduce your rate by .25% APR3 with automatic payments, and there are no origination or prepayment penalty fees.

Credit card balance transfer for debt consolidation

If you’re carrying debt in the form of high-interest rate credit card balances, your best option is to transfer those balances to a low-rate credit card with a balance transfer offer. For example, our Visa® Platinum Rewards and Visa® Platinum Advantage offer 0% intro APR4 for 12 months on balance transfers. Plus, we offer special balance transfer offers throughout the year with the option to use convenience checks.

Still not sure which debt consolidation option is best for you? Give us a call at 800-323-2611 or schedule an appointment with one of our experts—we’ll be happy to help!


*Consult a tax advisor regarding deductibility of interest.
1Annual Percentage Rate (APR). Rates may vary based on creditworthiness. All loans, terms and conditions are subject to credit union qualifications and approval. Rates are subject to change without notice. Personal Loan APR’s are based on term with a monthly payment per $1,000 financed (6.49% APR/24 mo, $44.54). Some restrictions may apply. Does not apply to loans currently financed through DuPage Credit Union. Must be a member in good standing.
2First payment may be deferred up to 90 days. Interest continues to accrue during deferred payment period.
3Reduce your rate by .25% when you sign up to make your loan payments through auto pay. Reduce your rate subject to change without notice. Cannot be combined with any other offers. Must be a member in good standing.
40% intro APR on qualifying purchases posted within the first 90 days of account opening. The rate will be extended for the next 12 months. After that, your APR will be 12.75% to 22.75% APR based on creditworthiness.The rate you qualify for is based on your creditworthiness. This APR will vary with the market based on the Prime Rate.

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