When people find themselves in a mound of credit card debt and there doesn’t seem to be any way out, using home equity sometimes provide that “light at the end of the tunnel” feeling. Should this option be pursued, or avoided altogether?

This option was listed in an MSN Money article entitled The 3 Worst Money Moves You Can Make. Obviously you can see the slant they provide. Like most other things, there are always multiple ways to look at things and each situation is unique.

I’m definitely not a fan of using the equity in your home to fuel a consumerist lifestyle. I think most rational people would agree. This however, is not really the problem. When you’re loaded with debt from credit cards and the like, you tend not to think as rational anymore; it becomes more emotional.

Realize that paying of the credit cards is not the ultimate solution to the problem. You need to figure out how you arrived at your current situation in order to make sure it doesn’t happen again. Also, realize that paying off credit cards with home equity is not paying off the debt; it’s merely shifting the debt.

You need to firmly commit to paying off your debt. Once you’ve made this commitment, you can then begin exploring options to help in this endeavour. Using the equity in your home is one of these options. Other options may include balance transfers to another card with a lower rate or promotional offers.

Using home equity can make a lot of sense and is a viable option for those carrying credit card debt. However, remember to treat it as a balance transfer that allows you to reduce your interest payments and therefore pay the balance off quicker. The focus should be on reducing your debt in the timeliest manner possible.

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