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Location: 23.7 million to 162 million miles North of Venus
23,563 posts, read 12,535,636 times
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Quote:
Originally Posted by Ringo1
What does anyone think about taking out a line of credit on your house to pay off your credit card billing? I stopped at the bank today to cash in a CD to pay for my son's college tuition this semester.
I got to talking to the banker and he suggested that since I have so much equity in my house, I take out a line of credit (25,000) and use $9000 of it to pay of off my credit card debt. Reason being that the bank can give me a 3% interest rate and the credit card company is much, much higher.
I'm just tired of paying so much in interest and would like to pay it off quicker.
We moved away from our hometown about 4 years ago and I guess I spent a fortune running back and forth; hotel bills; doggie boarding, gas, etc. Plus, all my son's swimming fees were put on the card (that's how the club team billed) and those were quite high. Long story short, I'm trying to take a hard look at where I am today.
I'm definitely horrible at finances. Lord only knows how I got as far as I did in life.
Its a very bad idea, never trade unsecured debt for secured debt.
Credit cards are unsecured and if defaulted on then all they can typically do, if they sue and win, is garnish wages (if allowed by your state), levy your bank account (but if you remove your funds before hand then they wouldn't get anything), place a lien on your home and in general just bug the crap out of you with letters and phone calls. A home equity loan is secured by your house, if you default on it then they will take your home.
Also, you could eventually end up in far worse shape then you're in right now. If you don't change your overall spending* and credit card payment habits (paying in full every month for what you charge) then you'll probably end up running up credit card balances again, that you're making the minimum+ payments on, and, having to pay on that home equity loan as well.
*Look over your outgo and see where you can make cuts, for example ... cut the cable tv, you can probably find most of your favorite programs online. Cut eating out for lunch and dinner, brown bag it for lunch and make inexpensive meals for dinner at home. If you're a shopper than scale back, if you need something then hit the sale racks first, ignore things that you want but you don't need.
Create a budget, you can find free printable budget sheets online. Print one out, fill it out and stick to it.
Use the extra money that you've been saving by budgeting and scaling back and sock it towards the credit card debts.
If you have a credit card that doesn't have a balance on it, then you might contact them and find out if they will offer you a 0% no fee balance transfer for 6-12+ months, then balance transfer one or more of your higher interest balances to that card.
What does anyone think about taking out a line of credit on your house to pay off your credit card billing? I stopped at the bank today to cash in a CD to pay for my son's college tuition this semester.
No, do not put your house at risk for credit card debt. Bad idea.
Go to a non-profit credit counselor who can negotiate for less interest and put you on a payment plan. Pay off the debt, don't put it on your home.
Location: 23.7 million to 162 million miles North of Venus
23,563 posts, read 12,535,636 times
Reputation: 10475
Quote:
Originally Posted by Ralph_Kirk
No, do not put your house at risk for credit card debt. Bad idea.
Go to a non-profit credit counselor who can negotiate for less interest and put you on a payment plan. Pay off the debt, don't put it on your home.
Going by what Ringo1 had posted, it doesn't appear that she is struggling financially, where she's having problems making the payments on the cards, her home, etc. Instead it sounds like a budgeting problem.
From what she'd posted, there doesn't appear to be any reason why she should even consider trashing her credit by doing a DMP.
Well, I am having second thoughts about that line of credit on my house - the banker was awfully convincing though.
I have two major credit cards, one with a 9% interest rate and one with a 22% rate. Maybe I'll just see if I can transfer the 22% card balance to the 9% card balance and pay it off more quickly that way.
I don't want to screw up my house payments or trash my credit.
I'm not struggling financially; I just want to rid myself of credit card debt more quickly. I've quit all the travel to and from my hometown until I do and my son no longer has club fees for swimming that were placed directly on the card. It was cheaper to let the club bill that way (fees were outrageous) but . . . in the long run is costing me a fortune in interest fees on the one card.
Well, I am having second thoughts about that line of credit on my house - the banker was awfully convincing though.
I have two major credit cards, one with a 9% interest rate and one with a 22% rate. Maybe I'll just see if I can transfer the 22% card balance to the 9% card balance and pay it off more quickly that way.
I don't want to screw up my house payments or trash my credit.
I'm not struggling financially; I just want to rid myself of credit card debt more quickly. I've quit all the travel to and from my hometown until I do and my son no longer has club fees for swimming that were placed directly on the card. It was cheaper to let the club bill that way (fees were outrageous) but . . . in the long run is costing me a fortune in interest fees on the one card.
The short answer is that IF you're already aggressively paying down debt and you have your budget under control, transferring high interest unsecured debt for much lower secured debt can be a good idea, as you can dramatically reduce your interest charges and pay down the debt that much quicker.
However, if you HAVEN'T resolved underlying budgeting issues, then it's potentially a very BAD move, as you might run up even more debt and, as others have pointed out, your house will be at risk if you fail to pay down the first batch of debt, lower interest rate or no.
Location: 23.7 million to 162 million miles North of Venus
23,563 posts, read 12,535,636 times
Reputation: 10475
Quote:
Originally Posted by Ringo1
Well, I am having second thoughts about that line of credit on my house - the banker was awfully convincing though. It's his business to be convincing. If you bite then either way it's a win-win for the bank. If you pay it off, fine, they make some money off of you. If you default, it's fine since they take your house, which has a good equity cushion in it.
I have two major credit cards, one with a 9% interest rate and one with a 22% rate. Maybe I'll just see if I can transfer the 22% card balance to the 9% card balance and pay it off more quickly that way.
I don't want to screw up my house payments or trash my credit.
I'm not struggling financially; I just want to rid myself of credit card debt more quickly. I've quit all the travel to and from my hometown until I do and my son no longer has club fees for swimming that were placed directly on the card. It was cheaper to let the club bill that way (fees were outrageous) but . . . in the long run is costing me a fortune in interest fees on the one card.
I don't know what kind of balances you're carrying on the cards, but since you're already carrying a balance on the 9% card then it's not the best idea to balance transfer (BT) an amount from the 22% card to the 9% card, unless it's a last resort.
IMO, if you have good/great credit then you might consider getting a third card to BT the amount from the 22% (and maybe some from the 9% as well). Right now the Chase Slate card has an excellent BT offer .. 0% interest for 15 months and with no BT fee.
If you fail to pay the full balance off at the end of the 15 month period, then they will begin charging interest on the remaining balance you would have on the card at the end of the 15 month promo period, they would not retroactive the interest from the start date of the promo, the date you made the BT (retro'ing the interest to the promo start date is a store card tactic and not a major credit card tactic). The interest rate tiers on the Chase Slate varies from 12.99%, 17.99% or 22.99%, you wouldn't know until after approval, if approved, which interest rate tier you'd qualify for.
(if denied, Chase has been known to do approvals if the person who was denied asks their underwriters to reconsider the denial, though not always. If they lowball the credit limit on approval, they have also been known to give credit limit increases upon activation, though not always)
The only other lender that I'm aware of who offers a no BT fee is Navy FCU, but to join you'd either have to be an active, or retired, service member, or, sign up under a family member who is active or retired (from any branch of the service, not just from the Navy).
All other lenders have a 3% BT fee, or higher, which can add up if the amount(s) you're wanting to BT are high.
Quote:
Originally Posted by synchronicity
The short answer is that IF you're already aggressively paying down debt and you have your budget under control, transferring high interest unsecured debt for much lower secured debt can be a good idea, as you can dramatically reduce your interest charges and pay down the debt that much quicker. I agree that sounds like a good idea ... but only on paper. In reality it's not, even if the debt is being aggressively paid down and there is an under control budget. The reason being is that there is always the chance of a job loss, whether it's by downsizing, outright being fired, having an extended illness or injury, personal or familial, and being replaced because of being off for a very long time, etc., etc.
However, if you HAVEN'T resolved underlying budgeting issues, then it's potentially a very BAD move, as you might run up even more debt and, as others have pointed out, your house will be at risk if you fail to pay down the first batch of debt, lower interest rate or no.
Going by what Ringo1 had posted, it doesn't appear that she is struggling financially, where she's having problems making the payments on the cards, her home, etc. Instead it sounds like a budgeting problem.
From what she'd posted, there doesn't appear to be any reason why she should even consider trashing her credit by doing a DMP.
You are misinformed.
It does not trash one's credit to go to a non-profit credit counselor as I said. In fact, it will enhance credit, especially if otherwise one is on the verge of missing payments.
There are some "bad" credit "counselors" who will tell you to stop making payments and let your debt go into default--no, those are the one's I'm talking about. Those are chiselers who essentially just buy your debt after the banks write it off, and you pay them back.
But the non-profit counselors will take you preferably before you've missed any payments and negociate lower interest with the banks. Because you're working with them, there is no hit on your credit, except that all the accounts will be closed, and closing accounts is somewhat of a negative factor (in the arcane calculations of credit bureaus, it's better to have a lot of cards with no balance than to have closed your accounts).
Location: 23.7 million to 162 million miles North of Venus
23,563 posts, read 12,535,636 times
Reputation: 10475
Quote:
Originally Posted by Ralph_Kirk
You are misinformed.
It does not trash one's credit to go to a non-profit credit counselor as I said. In fact, it will enhance credit, especially if otherwise one is on the verge of missing payments.
There are some "bad" credit "counselors" who will tell you to stop making payments and let your debt go into default--no, those are the one's I'm talking about. Those are chiselers who essentially just buy your debt after the banks write it off, and you pay them back.
But the non-profit counselors will take you preferably before you've missed any payments and negociate lower interest with the banks. Because you're working with them, there is no hit on your credit, except that all the accounts will be closed, and closing accounts is somewhat of a negative factor (in the arcane calculations of credit bureaus, it's better to have a lot of cards with no balance than to have closed your accounts).
What? In your world a closed account that has a balance is a good thing?
Please explain how it is that you believe an account that is closed with a balance "enhances" a credit report instead of hurting it.
First of all, FICO does not factor being on a DMP. But, that doesn't mean being on a DMP won't trash a credit report as far as other lenders are concerned. A DMP typically runs for 4 or 5 years (depending on how much is owed, less time if less is owed). During the time a person is on the DMP, the card accounts will show as being closed with a balance (which is negative). Also, lenders will typically note on the credit reports, for each account, that the accounts are in a DMP (more negatives). After the DMP is successfully completed the lenders may or may not remove that notations, if not then a person would have to fight to get the notations removed. While a person is on a DMP they cannot get new credit cards. As far as loans, no loan lender will even look at them until there is at least 12-24 months of on time DMP payments, that includes co-signing for someone else (even co-signing for school loans). Even if a loan lender will consider them, at the 12-24 month period, they won't offer the best of terms.
If the DMP includes a 'settle for less', then that is another negative.
4-5 years down the line ... once the DMP is successfully completed, the accounts showing as closed with a zero balance, the creditors (hopefully) removing the DMP remarks and no settlement had been done, then that is when the credit reports would level out and no longer be trashed.
Adding to it, a person will have to pay fees to the company that is handling the DMP, even if it's a non-profit company. A person would be better off dealing with the creditors on their own rather than dealing with a DMP company.
I'm not saying that doing a DMP should never be done by anyone, because there are people who have their backs to the wall and have no other recourse than to do something like that, before it's so bad that BK is the only option. IF Ringo1 had made comments that the payments were becoming a hardship for her then I would have suggested that she contact the creditors and work out a repayment plan with them (though not suggest that she waste money on a company to do it for her)
But, Ringo1 has already stated that she is not struggling financially (did you miss that or just opt to ignore it?), and by her comments, she is not "on the verge of missing payment". It also sounds like her credit is probably still in good shape, since that loan lender had offered her the equity loan with fairly good terms. For her, to do a DMP at this point is unnecessary. Her best options is to cut her spending, create a budget and stick to it, throw the money she is saving at the balances and try to BT the balance on the highest interest rate card to another card that has a lesser, or no, interest.
IMO, to advise a person in her position to do a DMP is just as bad as advising her to file BK.
Been there, did that, credit calamity did not happen as you describe.
Even bought both a house during that period. Certainly was less of a problem than a bunch of payments would have been.
Certainly, the OP did say that there is no current financial crisis, so really, nothing more than motivation and temperance is necessary.
Also, I did not find any bank ever willing to negotiate interest rates independently with me. I've heard people say it could happen...I never experienced that, and I don't know what conditions others were in to see it.
Quote:
Originally Posted by berdee
What? In your world a closed account that has a balance is a good thing?
Please explain how it is that you believe an account that is closed with a balance "enhances" a credit report instead of hurting it.
First of all, FICO does not factor being on a DMP. But, that doesn't mean being on a DMP won't trash a credit report as far as other lenders are concerned. A DMP typically runs for 4 or 5 years (depending on how much is owed, less time if less is owed). During the time a person is on the DMP, the card accounts will show as being closed with a balance (which is negative). Also, lenders will typically note on the credit reports, for each account, that the accounts are in a DMP (more negatives). After the DMP is successfully completed the lenders may or may not remove that notations, if not then a person would have to fight to get the notations removed. While a person is on a DMP they cannot get new credit cards. As far as loans, no loan lender will even look at them until there is at least 12-24 months of on time DMP payments, that includes co-signing for someone else (even co-signing for school loans). Even if a loan lender will consider them, at the 12-24 month period, they won't offer the best of terms.
If the DMP includes a 'settle for less', then that is another negative.
4-5 years down the line ... once the DMP is successfully completed, the accounts showing as closed with a zero balance, the creditors (hopefully) removing the DMP remarks and no settlement had been done, then that is when the credit reports would level out and no longer be trashed.
Adding to it, a person will have to pay fees to the company that is handling the DMP, even if it's a non-profit company. A person would be better off dealing with the creditors on their own rather than dealing with a DMP company.
I'm not saying that doing a DMP should never be done by anyone, because there are people who have their backs to the wall and have no other recourse than to do something like that, before it's so bad that BK is the only option. IF Ringo1 had made comments that the payments were becoming a hardship for her then I would have suggested that she contact the creditors and work out a repayment plan with them (though not suggest that she waste money on a company to do it for her)
But, Ringo1 has already stated that she is not struggling financially (did you miss that or just opt to ignore it?), and by her comments, she is not "on the verge of missing payment". It also sounds like her credit is probably still in good shape, since that loan lender had offered her the equity loan with fairly good terms. For her, to do a DMP at this point is unnecessary. Her best options is to cut her spending, create a budget and stick to it, throw the money she is saving at the balances and try to BT the balance on the highest interest rate card to another card that has a lesser, or no, interest.
IMO, to advise a person in her position to do a DMP is just as bad as advising her to file BK.
It's not always about self control. I didn't get into debt via retail therapy. I'm trying to pay off the cost of having my daughter's wisdom teeth removed (dummy me, I thought insurance would pay for it) and some unexpected car repairs. And my ex decided to reduce the amount of child support he was going to pay. I think I can pay it off in 6 months, but my income is limited right now.
Yep, debt sucks. I hope never to be in this position again.
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