Using home equity to manage debt can be a strategic move. But it’s also risky, so careful planning is key. Consider following these steps if you’re thinking about using a HELOC for debt consolidation.
1. Assess Your Financial Situation
The first question to ask yourself is this: Do I have enough equity in my home to qualify for a HELOC? If the answer is no, look for an alternative. If the answer is yes, it’s time to assess your credit score.
Your credit score plays a significant role in getting approved for the lowest HELOC rates. You’ll also want to make sure you have a stable income and a debt-to-income ratio signaling you can afford to make the monthly payments on your HELOC.
A debt-to-income ratio is a…
