Updated: Thursday, 24 Sep 2009, 9:01 PM EDT
Published : Tuesday, 22 Sep 2009, 11:40 AM EDT
SPRINGFIELD, Mass. (WWLP) - A pile of credit card debt can be daunting and finding a way to pay it with a low interest rate can sound like a life saver. Some people have been turning to home equity loans to help them catch up, but that can be a dangerous gamble.
Milagros Johnson from the Springfield Mayor's Office of Consumer Information told 22News taking out a home equity loan can be a risky option.
"The only way I recommend it is for those consumers who are extremely disciplined with their finances and know how to live within their means,” she said.
Milagros said it is important to know the difference between secure and unsecured debt. Credit cards are secure debt --- if you default on your payments, the only thing that can be taken away is your credit card and your good credit score. But if you default on a home equity loan, you risk losing your home.
There are some positive aspects to using a home equity loan. The interest paid on the loan is tax deductable, there is usually a fixed interest rate that is set for the life of the equity loan, and lower interest rates and payments are available.
Milagros said no matter what you decide, the most important thing is to stop using your credit cards in the process.