HOW MUCH SHOULD I BORROW?
How much, you ask? Lets take a look …Lets say you owe $19,500 or so in credit card debt. That’s a significant sum to most folks. Now lets say that the credit card company is charging you 11.4% interest–not a great rate, to be sure. In this case, you might be paying more than $180 per month in finance charges. If you make the minimum payment of $200 per month, you’ll likely never pay the loan off. Divide that $19,500 by $20 of principal per month and you’ll end up with 975 months … that’s 81 years and change. 81 YEARS.
If you take out a ten-year home equity loan at say 5%, your monthly payments may be in the same $200 ballpark. The difference is that a larger portion of your payment each month will go towards paying down your principal. If you make only the monthly payment each month, you’ll retire the home equity debt in ten years.