Is a HELOC Good For Debt Consolidation?
Apr 26, 2023
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American household debt has been on the rise for years, leaving homeowners anxious about managing their finances and open to opportunities to save on high-interest payments.
According to recent data, debt hit a record high of $16.9 trillion in 2022. This staggering statistic shows that many Americans are struggling to make ends meet, with some finding a solution in debt consolidation.
One of the most popular means of debt consolidation in the US is a Home Equity Line of Credit, most often referred to as a HELOC, which allows homeowners to access the equity in their homes to pay off high-interest debt. But is a HELOC a good option for debt consolidation?
What is a HELOC?
A HELOC is a specialist loan that uses your home equity to allow you to borrow money.
At Hitch, we’ve simplified the application for these loans to allow US homeowners to access critical funds quickly via our website. Homeowners can borrow up to $500,000 or 90% of their current equity and the funds can be released within a matter of days.
Is a HELOC Cheaper Than A Loan?
The interest rate on a HELOC can be lower than some other types of loans, which makes it an attractive option for debt consolidation.
HELOC rates will generally be higher than mortgage rates but you will only pay interest on what you borrow. For this reason, many find that HELOC payments are an affordable debt management solution.
At Hitch, we believe that your home is your biggest asset and we want to help you maximize its value. Our digital HELOC allows you to unlock up to 90% of the equity in your home and use the funds to consolidate your debt or make home improvements.
Is It Smart To Use Equity To Pay Off Debt?
Using equity to pay off debt can be a smart financial decision for some homeowners.
Equity is the value of your home that you own outright (calculated by the current market value of your home minus your outstanding mortgage balance).
By taking out a Home Equity Line of Credit, you can access the equity in your home as a low-interest loan to pay off high-interest debts, such as credit cards. This allows you to consolidate debt and save money on high-interest payments. Consolidating debts can also simplify time-consuming debt management.
Use our HELOC calculator to estimate how much you could borrow.
Benefits of HELOC For Debt Consolidation
- Lower Interest Rates
A HELOC will typically have a lower interest rate than other loans, like credit cards or personal loans. By consolidating your debts with a HELOC, you can save money on high-interest debt and pay it off faster. This can help you to achieve long-term financial freedom without losing out by paying interest on these high-interest loan products.
- Simplifying Your Finances With HELOC
Perhaps the biggest benefit of a HELOC is that it simplifies your finances and makes managing debt more straightforward. By consolidating multiple debts into one manageable loan, you can focus on paying it off and taking back control of your finances.
- Choosing a HELOC Hitch understands that managing your finances can be extremely stressful and often time-consuming, especially when you’re managing debt. That’s why we’ve done everything we can to make the HELOC process as simple and accessible as possible.
Your home is so much more than a place to live, it’s a valuable asset that can help you and your family to find financial solutions that work for you.
Learn more about Hitch and how we can help you to improve your financial health.
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Hitch, Inc. #2363780
2158 NW Toussaint Drive. Bend, Oregon 97703
1. Qualified applicants may borrow up to 95% of their home’s value. This does not apply to investment properties.
2. HELOCs have a 10-year draw period. During the draw period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) the total of all accrued finance charges and other charges for the monthly billing cycle. During the draw period, the monthly minimum payments may not reduce the outstanding principal balance. During the repayment period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) 1/240th of the outstanding balance at the end of the draw period, plus all accrued finance charges and other fees, charges, and costs.The lender will calculate this amount by taking the outstanding Account Balance on the last day of the draw period and dividing it by 240 months and then adding any finance charge that accrues but remains unpaid during the monthly billing cycle plus any other fees, charges and costs to the fixed principal payment that is due. During the repayment period, the monthly minimum payments may not, to the extent permitted by law, fully repay the principal balance outstanding on the HELOC. At the end of the repayment period, the borrower must pay any remaining outstanding balance in one full payment.
3. The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Most borrowers get their cash on average in 21 days. The time period calculation to get cash is based on the first 4 months of 2024 loan funding's, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications. Closing costs can vary from 3.0 - 5.0%. An appraisal may be required to be completed on the property in some instances.
4. Not all borrowers will meet the requirements necessary to qualify. Rates and terms are subject to change based on market conditions and borrower eligibility. This offer is subject to verification of borrower qualifications, property evaluations, income verification and credit approval. This is not a commitment to lend.
5. The content provided is presented for information purposes only. This is not a The content provided is presented for information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. Other restrictions may apply.