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Monthly payments on home equity loan lines of credit are lower than credit card minimum payments

06/12/2007

A common misconception amongst borrowers is that credit card payments, even minimum monthly payments, would be cheaper than monthly home equity loan payments. Quite the reverse is true.

For each $10,000 amount that you get through a home equity loan, you would pay $60 a month with a rate of 6%. But for a credit card that you have a $10,000 debt on, you almost always would have pay a minimum payment of $300 every single month: no matter what the rate for that credit card is.

This is because credit card companies usually require their credit card users to pay 3% of their debt on their credit card as a minimum payment each month: and that minimum payment must always equals 3% of your debt: whether your credit card rate is 18% or 12%.

Learn more about home equity loan lines of credit

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