Cash offer frm Credit card w/ 4.99% APR for life and HELOC w/ 8%. Which one should I choose for home improv.?
by Author on Friday, July 2nd, 2010 | 3 Comments
I am planning to do a little bit remodelling for our house, which will cost us around 10K. I have an offer from Credit card company for 4.99% checks for the life of the balanace and also another offer for home equity for prime rate 8% (since I only borrow the minimun, they can't give me their best rate).
Considering tax refund and fico score, which one should I take? If I take the credit card offer, will it hurt my FICO score more than if I take the home equity? (my score is around 765).
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I would do the home equity loan because your interest will be tax deductable.
Depending upon your tax bracket and other deductions, you may be able to deduct the interest on a HELOC. I don’t believe this to be too important in your situation given the 3.01% spread in the two rate options. The credit card is fixed and a lot less expensive than the HELOC. The HELOC is a floating rate tied to prime and we’re in a rising interest rate envirionment. The credit card seems to be the better choice.
Things to consider: What is the minimum payment for each option? Do you need a low payment, or are you planning to retire the debt quickly?
good luck
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