what loan is best for paying off credit cards?

[elaineandmichaelsmommy]

I did a search for loans and it looks like noones posted about this in awhile so I thought it might be safe to ask.
Dh and I have a couple of credit cards that need to be paid off. Paying them is like slogging through financial quicksand and at this rate we won't have them paid before dd needs to start parochiol school so we've come to the conclusion that somethings gotta give. Just tonight the lightbulb went off and we thougt that a home equity loan might be a good idea. It would be less than the cc and the interest would be lower. and it would free up the money for dd's tuition.
I was just wondering if anyone else had any experience with this and any advice.

jen

[C99]

We took a HELOC to make some house repairs and also transferred the balance on our CC to the HELOC. It made sense for us because it wasn't a huge amount and allowed us to use a small amount of equity already built up in our home. The interest on a HELOC is (a) lower than on a CC and (b) tax-deductible. The important things to remember if you do this, however, are that you have to make payments on the principal on the HELOC and you also have to refrain from racking up the CC again.

[Momof3Labs]

As long as you can keep up with the payments since you are putting your house at risk when you do that.

[gina]

Like Lori said you are putting your home at risk. And you are not really getting rid of the debt but transferring it. I wouldn't do it. You would be better off attacking your smallest debt (smallest in amount, not in interest) and getting it out of the way to free that money up for either the next highest debt or for tuition. Do what you have to to pay it off but don't get your house involved. If you have to get it consolidated, see if you can get a personal loan.

If you've never listened to Dave Ramsey, check him out. He is the king of getting out of debt. He lost everything and now is a multimillionaire.
www.daveramsey.com

Here is a quote from his web site.
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What is a home equity loan?
A home equity loan is where you borrow money against your home. If you get a home equity loan, you are risking the roof over your family. This is your home, your shelter! It is a stupid practice to borrow more than your home is worth. Many notes publications have said home equity loans are the next big downfall of the consumer.

The truth is this: you cannot borrow your way out of debt! The way you get out of debt is by changing your habits. You need to commit to get on a written game plan and stick to it. Maybe even getting an extra job and start paying off the debt would be a good idea for your situation. Living on less than you make is a key factor. It is not rocket science; it’s just basic common sense mixed with disciplined behavior.


Why doesn’t debt consolidation work?
Debt consolidation doesn’t work because you end up paying about the same amount. The truth is that you cannot borrow your way out of debt.

The way to get out of debt is by changing your habits. You need to commit to get on a written game plan – a budget – and stick to it. Get an extra job and start paying off the debt. Live on less than you make. Getting debt free is not rocket science; it’s common sense and self-discipline.

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Go to his web site and search for home equity loan and it will give you more info.

Good luck with whatever you decide

Gina E

DD 15 yr
DD 11 mo

[ShanaMama]

I *love* Dave Ramsey. He is the only one out there who actually tells you how to get out of debt, rather than further in.

[lovin2shop]

I would check with a couple of banks to try to get a debt consolidation loan instead. Like the PP mentioned, the HELOC is riskly, should unforseen circumstances happen, you risk losing your home for the benefit of a relatively small amount of money. Also the HELOC's are not always tax advantaged because many people will fall into the alternative minimum tax and lose that advantage completely. The key with a debt consolidation loan is to not charge the cards back up though. Otherwise it is best to just pay them down, highest interest rate first. ITA that Dave Ramsey is a good source for some guidance. Good luck, it is challenging, but you will feel so great when you get over this hill!

[kijip]

I agree with the pp. it is not worth it unless you are a borrowing a very small percentage of your equity for a very specific need. If you truly can't manage the credit card payments, consider talking to a reputable consumer credit counselor about a consolidated payment plan, perhaps with agreements to lower the interest. Your credit will take a hit but you won't lose your house if you can't pay and it is a smaller hit than defaulting or bankruptcy. If you can possibly manage to pay the cards off without a HELOC or going into a debt management plan, you should do so. The key to cutting out debt is to reduce your expenses to the greatest degree possible and funnel as much extra money as you can to paying of the debt. Good luck.

[Sillygirl]

I agree with Caroline, that the most important thing is changing your current spending habits. Otherwise, all you're going to do is put your house at risk. If that's not something you are absolutely sure you can do, calling the credit card companies and renegotiating the rates is probably a better bet.