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10 Steps to Paying Off Credit Card Debt

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Don't Use a Home Equity Line of Credit to Pay Off Credit Card Debt
Many financial planners will tell you to use a HELOC, or home equity line of credit, to pay down high interest credit card debt. I’m not a big fan of this approach for one simple reason – if you do decide to use the nuclear option and declare bankruptcy, your credit card balances are unsecured, while a home equity line of credit is secured by your house.

Practically, this means that you’ve taken a debt backed only by your credit, where the worst a credit card company can do is go to court and get a judgment against you, into a debt backed by your home, where the worst is far direr – the bank can foreclose on your house and kick you to the curb.

Regardless, this is entirely your call as it’s going to come down to what will let you sleep at night. If your credit card debt is manageable, and you just want to save a few thousand dollars in interest expense, a home equity line of credit might make sense. If you think there’s even the remote possibility that you may be forced to declare bankruptcy, it can be a tragic mistake that costs you your house.

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