Home Equity Line of Credit Vs. Credit Cards-which Works Best?

by : Andre Hollinshed

We all enjoy spending money but we do not necessarily always have money to spend. Most people are living paycheck to paycheck and do not always have enough money to get them from point A to point B. This is when we tend to either borrow from friends or apply for a credit card to try and better our financial situation.

Financial intelligence is key when it comes to managing your finances. A lot of us lack discipline where our finances is concerned. Most of us use credit cards to avoid carrying large sums of cash, in case of emergencies, putting down payments on a new/used car etc. Your monthly payments depend on the amount you spend.

Having a credit card can be very helpful. What happens when you want to make a payment online or over the phone? Can't use cash. A credit card becomes your virtual cash for making those quick payments by phone or electronically.

A credit card is only bad when you over step your spending boundaries. If you start spending more money than you make then you are digging your self a hole. I mean this is just common sense don't spend more than you make.

Home Equity Line Of Credit

Now on to the other form of credit, which is the home equity line of credit. This type of credit is used against the equity of your home. Homeowners use a home equity line of credit for paying off debt, emergencies, paying for education etc.

Since the loan is guaranteed by the equity of your home you should take full advantage of it. It usually has a low introductory rate and a variable interest rate but a fixed interest rate is negotiable. Since the loan is secured by your home it may be possible for you to have the interest deducted.

Some lenders may want to look at your income, credit history, debts, and other financial obligations to determine your credit limit and how much you may actually be able to repay. But as I have always said it is best to shop around to see where the best deal lies.
A lot of mortgage brokers and lenders would be more than happy to work with you in trying to find the best loan for you.

Summing It Up

The amount you can qualify for on a credit card is going to be determined by your income and credit history. With a credit card you may spend a few thousand dollars then the card is topped-out until you renew it. But it is different with a home equity line of credit.

With a the amount you can qualify for is determined by the value of your home. The HELOC is nearly worth the price of your home. With a credit card you build up credit that you may qualify to purchase a home, new car etc. With a HELOC it is possible for you to have your interest deducted.

I wish you the best on your research and the decisions you make.