What are some of the most common ways people rack up credit card debt?
- Spending too much during the holidays?
- Making only the minimum payments?
- Needing to pay for a medical emergency?
Everyone who has credit card debt has a different answer. And that’s okay. No matter how you got into debt, there’s an effective way to manage it better known as a home equity line of credit (HELOC).
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How does a HELOC work?
Your equity is the value of your home minus what you owe on it. So if your home is worth $200,000 and you owe $100,000 on your mortgage, you have $100,000 in equity. To determine how much your home is currently worth, we’ll have it appraised for free (more on this later).
When you apply for a HELOC, we’ll examine your available equity and credit score to determine a credit limit. You can borrow on this credit limit during what is known as the “draw period.” The draw period is usually 5-15 years long. During this time, you’ll need to repay what you borrow.
One of the advantages of borrowing with a HELOC is low rates. While the rates are variable, they often remain very low because you’re using your home as collateral. You only pay interest on what you borrow. When you make payments, your amount of available credit increases.
How to pay off credit card debt
When you apply for a HELOC, we’ll pull your credit report to see who you owe money to. In most cases, you’ll have the option of paying off these creditors on your own. You could also leave it to us and we’ll mail checks and sometimes even close your credit accounts for you.
Once your high-interest credit cards have been paid off, you’ll be able to see your available HELOC balance within your online + mobile banking account. You’ll also see your new monthly loan payment and be able to pay it using your Arsenal checking or savings account.
Is a home equity line of credit a good idea?
Generally it is. A HELOC lets you consolidate your high-interest credit card debt into a lump sum loan. This often leaves you with a lower monthly payment and without the chaos of managing multiple payments every month. Interest rates usually stay very low, and will never hit the highs of most consumer credit cards.
An important note about borrowing with a HELOC is that your house is the collateral. You’re responsible for making your payments on time or your lender could take possession of your home.
If you don’t own your home, there are other good options for consolidating debt like personal loans and balance-transfer credit cards.
What’s the advantage of applying at Arsenal?
- Borrow up to 100 percent: For example, if you have $100,000 in available equity, most lenders will only let you borrow up to 80 percent of it ($80,000). When you choose us, you can borrow the full amount. We’re one of the few places in the St. Louis area that makes this happen.
- Pay no closing costs: Closing costs on a home equity line of credit can usually cost you between $500 to $1,500. We take care of these as long as you don’t pay your loan off before the first 12 months. Closing costs usually cover appraisals, title searches, document fees, etc.
- Get personal service: Deal with a team that’s 100 percent local and understands your needs. We’re available to help you at all four of our branches and online via live and video chat.
How do I apply?
There are three ways to start applying for your HELOC.
