Reduce Credit Card Debt Without Home Equity

Declining home prices have reduced equity for homeowners and fears of foreclosure make homeowners understandably reluctant to increase the loans on their property.

Tapping into the equity built into your home was a recommended method for paying off high interest cards with balances that had soared due to a temporary loss of income or high medical expenses.

The equity in your home is the difference between the market value of the property and the mortgage balance.

You may have found yourself
paying off debt by taking a loan on your home and could do that every other year as the increasing value provided increased equity.

The crash of the housing market was a shock to those who had routinely used the equity in their homes. There are ways to eliminate your debt without home equity.

Consolidation Loans

When you consolidate your debt, you are taking one loan in order to pay off several smaller credit accounts.

If the monthly payments have been difficult to me, a consolidation loan will carry a lower interest rate and provide a monthly payment lower than making payments on several accounts.

Consolidation loans have long been used to reduce debt without using home equity but changes in the credit market in the current economy make them out of reach for all but those who have excellent credit ratings.

Snowball Your Credit Card Debt

The debt snowball is nothing more than a dedicated payment method that reduces the amount of time it takes to pay off credit card debt. List your debts in order of interest rate charges. For all except the highest interest rate account, you will pay only the minimum payment due each month.

For the account with the highest APR, you need to cut back in other areas of your budget to make a payment each month that is significantly higher than the minimum. Any extra money you receive from gifts or overtime work should be applied to the debt of that card.

When the first account is paid, take the amount you were paying monthly and add it to the minimum payment for the second credit account on your list. This method takes self discipline but will result in paying off all of your debt quickly.

If You Are Desperate

If you do not have the income to pay your credit bills monthly and you are reasonably certain your financial status will not soon improve, there is another way to reduce debt without home equity.

Many credit lenders will negotiate your total debt downward in order to receive some payment of your obligation. This is not an ideal process as your credit score will be affected and you will lose the use of your credit cards.

However, if you are unable to pay what you owe, lenders will often settle for less if you can prove inability to pay the full amount due.


The housing market is still unstable in the U.S. There have been no signs prices will begin to rise or that the market will return to anything that resembles the housing bubble of the early 2000s.

If you have equity in your home, using it to pay debt may not be a financially sound decision. If you are like many homeowners today, your equity may have almost totally disappeared at last for now.