Paying Off a Home Equity Loan

The last 6-10 years have been seen both a boom and, currently, a bust, in the housing market. Home sales had sky rocketed and to either help finance a home and its projects, avoid PMI or simply for use on other purchases, many took out a home equity loan, often with the interest tied to some financial index. With the current state of housing falling and your property value more than likely lowering, your home equity loan may be becoming a bill that makes going to the mail box a pulse quickening event. But there are some ways to minimize the impact of those loans on your current financial picture.

The simplest way is to set up an automatic payment. Essentially, the bill is paid automatically out of your account at a date and doesn't sit on your kitchen table glaring at you . With this out of sight out of mind technique, the bill is paid without effort by you and comes from a pre-determined account, typically one that receives your paycheck. With it paid in this manner, a home equity loan can be slowly but reliably paid down and no further steps are needed.

Though annoying, some of those credit card offers that come through the mail may actually be of great help and offer another option to pay off your home equity loan. These credit card deals, with balance transfers that may be locked at a fixed APR, can have rates significantly lower than many home equity loans and are essentially a fixed payment. T

he down side to these is that many of them are not open to people whose credit has been adversely affected by all of the current economic turmoil. Also, there are usually limits on the amount to be transferred and fees involved as well, but on the long run these fees will be minimal when compared to what you may have been paying had you stuck with a typical home equity loan at a variable rate.

Another option to pay off a home equity loan would be some form of asset liquidation, such as savings, stocks or bonds. By calculating the current interest on your home equity loan, any form of tax liability from the sale of such assets and comparing it to the return on investment of either your portfolio or your savings account, you may see that this higher rate of debt is leaving you in a negative balance scenario. While in the short term your savings or retirement may be slightly depleted, the long term savings in interest paid may be worth it and another viable option.

With the options presented here, paying off a home equity may be an easier proposition than you think. From the long term savings in a reduced interest rate to the security of locking in a rate and with it a fixed payment, these options may indeed lead to a much better nights sleep in that lovely home you are working so hard to pay off.