Should I use a HELOC to pay off holiday debt?


Q. I know I spent too much on holiday shopping and I won’t be able to pay the balance of my credit card probably until March. I do have a home equity line of credit with a low interest rate. Should I just pay off the card with that or just suck it up and live with the high interest rate on the card?
— Big spender

A. It’s good that you have an option, but you’re going to have to be careful. If you take this path, you want to make sure that you don’t start overcharging on the credit cards again.

You should consider using the home equity line of credit (HELOC) to pay off the credit cards, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

You will need to remain disciplined, she said, and pay off the credit line in March once you are able.

Generally speaking, she said, credit cards have much higher interest rates than HELOC’s which are benefiting from the currently low interest rates.

“You should check to be sure as some newer credit cards have lower rates for a period of up to one year,” D’Agostini said. “Interest on home equity lines of credit used to be deductible on your tax return for amounts of less than $100,000, but with the Tax Cuts and Jobs Act of 2017, gone is the ability to deduct interest on these loans for any reason other than home improvements.”

Good luck getting rid of that debt.

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This story was originally published on Jan. 3, 2020. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.