American homeowners are cheating themselves out of thousands of dollars by using personal loans and credit cards to finance loan interest payments, instead of lower-cost options like their home equity, according to new research published today by Figure Technologies, a digital home equity lender.

As a result, millions of homeowners are paying $100 billion more in loan interest payments, the research showed.

Using home equity to cover financing needs with a secured loan typically requires much lower interest rates, Figure said, adding that data analysis has found that 16.3 million homeowners considered in the study are paying on average $6,225 more than necessary on interest payments.

Home equity in the U.S. is at a record-high $15.8 trillion. Also at a record high number is the $6.3 trillion considered available for borrowing by typical industry metrics, the research noted.

“Currently, borrowers are paying the highest interest on credit card balances of any time in the last 24 years,” said John Sweeney, head of wealth and asset management at Figure in a statement. “Refinancing expensive debt using home equity may be the easiest way for a homeowner to save thousands of dollars.”

A number of recent trends, Figure noted, have pushed homeowners toward more expensive debt options. These trends include the heavy marketing of personal loans over the last decade, which increased loan volume from 2011 to 2018.

Also, credit card debt has risen past the previous peak in 2008 and hit a new high of $1.05 trillion in December 2018.

In addition, Figure pointed out that banks have tightened lending practices since the 2009 housing crisis to make home equity line of credit (HELOC) applications more cumbersome, slow and expensive, involving reams of forms and up to 60 days to close.

The research showed that the highest amount of unsecured debt per homeowner was in Alaska at $16,544; Texas followed with $14,744 and South Dakota with $14,622. Those homeowners could save an average of $8,077, $7,169, and $6,433, respectively, the research noted.

On the other hand, the three states with the lowest amounts of unsecured debt are Ohio at $10,372, Iowa at $10,549 and Wisconsin at $10,925. Figure said homeowner savings in these states could be $5,210, $5,109 and $5,336, respectively.

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