Using your home equity to pay bills is a terrible idea

With rising home values many homeowners are finding they have a lot of equity in their homes, and there can be a temptation to dip into that money. In fact, according to a recent survey, 74 million Americans think it's OK to use it to pay day-to-day bills. But, please, don't do that.

First, quickly, let's review equity again. Take your home's current value. Say, it's $200,000. And let's say you still owe $100,000. Your equity in that home is what's left  -- $100,000. Lenders will let you borrow a portion of that.

More typically folks use it to improve or upgrade their homes. It often comes with a lower interest rate, although that rate is often variable, which means it can quickly go up.  So, always use caution. Remember when you dip into your home equity you are borrowing on your house.

As we said, it's a lot of potential cash at your fingertips and it's tempting to use it. But here's when you do not use it - to pay your everyday bills. If you need to dip into your home's equity to pay bills that's not a good sign regarding your money management.

Here are some stats to chew on from Bankrate. an online financial management stop for tools and analysis. If you earn less than $30,000 a year, one in three homeowners finds it OK to tap into their home equity to pay bills. Millennials, 22 percent of you think it's a reasonable option. And finally, if you are college educated, only 11 percent are good with this.

Now, again, you could get a home equity line of credit and pay off credit cards. The interest rate on that loan would be much, much lower than it would be on those cards. But here's the pitfall: If you don't change your spending habits you end up in deeper do-do if you will. You have to be so, so, so very careful.

Is there a safe way to pay off debt with it? Cut up your cards. Go cash only until it's paid off.  It's truly tricky territory.