The average American household owes $9,840 in credit card debt, but I have met people who owe their entire annual income or more—often at a double-digit interest rate. To these people, a home equity loan looks downright reasonable.

But if they haven't mended their spendthrift ways, a home loan won't help them. A study in the late '90s found that nearly two-thirds of those who took a home loan to pay off credit cards resorted to their cards again within two years.

The worst-case scenario gets uglier. Home equity loans are "secured debt." Should you file for bankruptcy, you could lose your house. Credit card debt, because it's not backed by an asset, is "unsecured," and in a Chapter 7 bankruptcy proceeding can be wiped away.

Instead of shuffling credit card spending to a home-backed loan, take advantage of one of those come-ons you get in the mail offering low (or no) interest on balance transfers. Pick one with a low transfer fee, if any, and then do not, under any circumstances, buy stuff with the new card. The interest rate on new purchases tends to be much higher than that on transfers.


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