Thinking about taking a home equity loan to clear my debt. Bought my house in August 2022 for $306k, but not sure how much equity I have now. I’ve got around $32k in debt (not counting my car), and I pay $560 a month for my car since I got it in July. Bills have shot up lately, and my salary isn’t keeping up. I’m not behind on payments, but I’m living on a super tight budget. Any advice?
Don’t risk your house unless you’re ready to lose it.
Never use your home to pay off something like credit card debt.
For me, home equity is for emergencies only.
Turning unsecured debt like credit cards into secured debt tied to your house is risky. If you can’t pay, you’ll lose your house, not just face a civil judgment. I’d say it’s a terrible idea. Look into other ways—side gigs, selling things you don’t need—before touching home equity.
Sounds like your income isn’t covering your costs already. Do you really want to put your home at risk too? It’s better to tighten your budget and start paying off that $32k instead of taking on more debt tied to your house.
Do you really need that expensive car? Can you sell it and get something cheaper? You might also have other expenses you can cut back on. Start by living within your means and paying off the debt, not adding more to it.
@Valen
A ‘tight budget’ with a $560 car payment doesn’t make sense.
@Valen
I paid off my car last year, and I’m driving it into the ground, haha. I used to have a fancy car in my early 20s, but after it got totaled by a drunk driver, I just drive whatever gets me from A to B now.
@Roan
What color is your Honda Civic? 
It’s actually a gray Volkswagen GTI. But I had a black Honda del Sol in high school!
It’s actually a gray Volkswagen GTI. But I had a black Honda del Sol in high school!
Stylish choice!
Maybe look into refinancing your whole mortgage instead of taking a second one. Or you could consider Chapter 7 bankruptcy if you qualify—your debt might get wiped out, and you could keep your house if it’s within the state’s homestead exemption. Another option is just not paying off all your debts right away and negotiating them down later when they go to collections.
Don’t spread your debt over 30 years.
Sell the new car and get a cheaper one.
Leith said:
Sell the new car and get a cheaper one.
I can’t, I have negative equity on it.
I sold my old house and used the equity to pay off about $33k in debt. It wasn’t fun, but it gave me a lot of peace, and I love my new house more. Now the only debt I have is my mortgage.
Using home equity to pay off debt is something people do a lot, but it can come back to bite you when you sell the house. My ex used equity to fund his business, and when we split, we only walked away with $16k each instead of $179k. Don’t mess with your one major asset. Find other ways to bring in money or sell stuff you don’t need.
Don’t touch the house equity. If your credit is still good, look into personal loans or a 0% APR card transfer. You could also talk to a debt management service.
What kind of debt are you dealing with? Credit cards, loans?
Nyle said:
What kind of debt are you dealing with? Credit cards, loans?
Credit cards. My dog’s vet bills were $7k, then my kid got sick, so that added more. I don’t have a spending problem, it’s all medical bills.