Home equity loan for credit card debt?

Question

Hi--
It's amazing how quickly you can go from livin' phat to flat broke.
My husband and I have $60,000 in home equity mostly from a very large down payment about 6 months ago. And now are about $15,000 in the hole with credit cards at about 10%.
I think taking out a home equity loan (we are 6% on that one) is a good idea, but don't know that much about it. Will it damage credit ratings, etc?
We can pay the bills just fine but don't like the fact that amex owns our azzes.
Any advice greatly appreciated. Thanks!!

Answer 1

This may not be the answer you wanted to hear. but here is a quick analysis.

You have a lifestyle problem. The reason you went from living "phat" to "flat" is that you bought a whole bunch of junk on credit because you couldn't afford to pay for it with cash. In translation, you've been living beyond your means for the last 6 months; it's just taken this long for it to catch up with you and you to come to the realization that you have to find some way to pay for all this.

There is a fundamental problem with taking equity out of your home to pay the bills in your situation. In 6 months, you managed to build $15k in credit card debt. If you pull $15k of equity out of your home, you can pay the credit cards off (nevermind the fact that you'll be paying it off over 30 years or however long the loan terms call for). The problem is that if you don't change the way you handle your money (see paragraph #2), in 6 months you'll be back int he same boat: a bunch of credit card debt and no way to pay for it except to pull more equity out of your home. That works fine once, or maybe even twice. However, it's a losing plan in the long term because you'll eventually have no more equity to pull out and you'll be stuck with the credit debt AND the increased mortgage payments.

If you take the equity in your home and turn that into cash to pay off the credit card debt, you really need to cut up those credit cards, close accounts, and vow to not use credit cards again. If you don't change these habits, you will find yourself in this situation again down the road, and someone, be it AmEx or the mortgage company, is going to continue to "own your azzes" for a very long time.

Good luck.

Answer 2

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Answer 3

If your car and credit card interest rates are higher than 6% (which they usually are) you'd be better off taking out the home loan and paying off the car and cc debt. However you have to factor in any costs incurred to take out the equity loan. Good luck and Hope this Helps.

Answer 4

Why don't you consider transferring the $15,000 to another card with a lower interest rate? Just make sure it has no prepayment penalty.

As for using the equity, use it only if you absolutely have to. If necessary you need to work to pay off those credit card debts without using the equity. What my concern is, is that because of the market you may no longer have $60,000 in equity. So pay attention, pay down those cards.

Answer 5

Very bad idea to roll credit card debt onto your house. In the same way that you ran up that $15K credit card debt, once those credit cards are paid off, the debt will start again.

Then you have the equity loan and the credit cards to pay. That's how many people get themselves in trouble.

Cut back on the extras and throw that money at the credit cards. Concentrate on the highest interest rate one first, then go to the next tll they are all paid.

Answer 6

i would not if you are making the payments i would keep up the same schedule -- i you figure in the cost of a new loan and fees etc and put that money toward one of the credit cards it would take a bite out == than start downsizing you life some or a lot -- depending how quick you want to be debt free -- say you cancel cable or reverted back to basic and put that into a payment or cells phones do you really really need them -- answers and Internet are nice but is it a need or a want == get the picture -- if you take these few baby steps you will really increase your credit score!!!

Answer 7

A home equity loan line of credit operates similar to a credit card. You can borrow up to a specific limit during the duration of the loan. The time limit is generally decided by the institution lending the amount. Within that time frame you can borrow money as per your necessity to pay for things that you require. As you go about repaying the principal, your credit revolves, allowing you to borrow again if necessary. Credit line is more flexible than a term home equity loan.
http://www.debt-loan-refinance-mortgage-credit.com/category/Home-Equity-Loans.html

Answer 8

If you plan to pay back the money , you can ask for a loan at Prosper. More information at http://www.acreditlibrary.com/prosper.html . You can also try your luck at online charities, people may send donations. More information at http://www.laodn.org/

Answer 9

you need search and open all your ways. I found interesting information about your answer Home loans with low interest & options here. http://all-debt-consolidation-loan.blogspot.com/2007/08/home-loans.html Good luck!