Tax, Debt and Home Equity Loans

In 1986 things changed. Hairstyles, clothing, music styles and tax law. You may not have been around in the 80's but I was. In fact I was in England at that time and it was the end of the Thatcher "golden era" and the BOOM! had gone BUST! Home prices had plummeted, inflation was high, home-owners had over-borrowed and no-one could keep up on their home payments. It was a bad time and the silly clothes and the silly hairstyles just weren't appropriate any more.

So, here we are in the 21st Century and we're finding similar things happening within the home-owning sector again with home-owners finding it difficult to repay their loans or getting into credit difficulties. At least this time the hairstyles aren't so ridiculous. And the tax laws are in place to help those with less-than-good-credit.

With those changes in the law it can now be beneficial to use a Home Equity Loan to change your 'Bad Debt' into 'Good Debt'. That is, for example, to pay-off an auto loan by using a Home Equity Loan. For a start, the interest rates on a Home Equity Loan is going to be lower than that on an auto loan or a credit card. And that will most likely mean your monthly repayments are going to be lower. And that, in turn, means your repayments willl be easier to reach and maybe exceed. And, if you pay more than your minimum repayment, you'll find that your credit score will improve!

So far it's a win-win for the Home Equity Loan and nairy a bad hairstyle in sight!

Now, back onto the tax law. For loans up to $100,000 you can deduct the interest. In terms of the example above, where you use your Home Equity Loan to repay an auto loan, you'll find that not only are you saving money on your interest rates, but you'll get a further saving by deducting the interest. Kinda makes you wonder why you even bother with credit cards, right?

Well, it's not all a bed of roses. Too many people don't understand all the applicable tax laws when it comes Home Equity Loans. That's why there are people out there who make a lot of money sorting out the mess that us-every-day-people get into.

I was planning on writing a lengthy and complicated article on Home Equity Loans and the tax implications thereof but it would really be a disservice to anyone reading. Tax laws vary from state to state and what might be applicable to my Home Equity Loan, might not be applicable to you.

So, here's the best advie I can give you. Talk to a tax specialist. It may cost you a few bucks, but in the long-run it could save you, your credit score and, more importantly, your home!