Credit Card Debt Home Equity

I have about $5k in credit card debt which accumulated from furnishing a new house 4 years ago and having two children. I have $40k in equity in my home (married a builder,lol). I'm tired of paying $150/month when $77 of it is finance charges. Monthly finances (child care, etc.) prohibit me from paying $500 month towards credit cards. Help.

Have you heard of the debt snowball? It's a method of repayment that uses the money you have to concentrate on paying down debts one at a time.
Using you home equity is tempting, but remember, you are trading unsecured debt for secure debt with your home as collateral.
The amount you owe is not that much. I don't think it's worth the risk.
Consistently paying as much extra toward the balance owed as possible will make an impact.
Also, if you've been paying on time and a loyal customer, call your creditors and ask if they will lower your interest rates.

2009-09-15 08:27:31 by brinkie69

Some of the principles behind consolidating your debt explained.

Consider this:
1. I have $30k in credit card debt.
2. I have a 1st mortgage for $200k (4%) and a Home Equity line of $170k (at prime rate) with no additional credit available.
3. I am buying another house at the end of April.

Would I be better off refinancing my Home Equity and Credit Cards into a new Home Equity loan, or just stick with it as is?

I have heard that I may be able to get better rates on my loan for my new house if I refinance. Could this be true?

Thoughts? Opinions? Alternatives?

You don't mention how much equity you have left in the home, but lets assume you have some equity. You would not want to "max out" your equity. Save at least 5-10% since you are going to be buying another home soon. Now if you have equity left to refinance your equity loan & pay down some credit cards, by all means do so. To best improve your credit score, pay off what you can, but at least reduce each credit card so that you have some available credit if any are at or near their limits. These are important factors in credit scoring and will get you a better rate on your new home. Its best not to close the cards that you pay off. Having that available credit will help your score. Close the cards after you secure your new home loan. Good luck!

2005-12-14 11:03:49 by Sean J

Price: $9.95 $9.95

Transferring credit card debt to a Home equity load, is this a good thing?

NO!. what you should do is transfer the balance to a new credit card with 0% INTRO APR. get one with 12 months INTRO period. during thus period you are not accumulating any interest at all as long as you pay the minimum monthly fee on time. transfer again to a new credit card with 0% INTRO period when the current card INTRO period is near the end. when you do this continuously you will pay your debt without accumulating any interest at all and your credit rating will rise because you pay your minimum monthly payment on time. hope that helps.

2007-09-17 20:26:35 by jorge11b

Price: $18.95

my credit card debt is $17000 and my loan is $9000. And what if I loose my job?

Just make more debt mate. Buy a boxing ring on credit, I am sure you'll have fun with it. If you lose your job you can complain like everyone else is doing.

2009-02-14 12:26:00 by L T

The interest rates on most of my cards has gone up to 26% & the payments are OUTRAGEOUSLY HIGH. The interest rate on the HELOC is Prime plus .760%.

It is not the interest rate that is the problem. You need to out of the credit card habit now. Taking out debt to pay off other debt is not going to solve your problem. Taking out a HELOC will put your home at risk. It is turning unsecured debt into secured debt that is secured by your home. Do you really want to take the chance of losing your home?
First you need to stop spending money that you don't have. Please do not consolidate or use a debt reduction company . It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. Or they negotiate your debt down after telling you not to pay for awhile adding another hit to your credit score. Student loans are the only debt that can garnish your wages for non payment without taking you to court first. Just list them out on a piece of paper or a spreadsheet and follow the plan. If you work the plan, the plan will work for you.

A. Have a garage sale and sell anything that you no longer need or want.

B.Get a temporary part time job, if you have one, get another.


Here is a plan that can help you. If you work the plan, the plan will work for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make.

2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment

Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment

Debt #1: paid off
Debt #2: paid off
Debt #3:Minimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.

You can do it and it isn't as hard as you think. Just follow the plan.

2009-09-22 16:33:05 by natona