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Member
Posts: 9
Registered: ‎08-26-2009
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Home equity loan

I am considering getting a home equity loan to pay for a Discover card bill that I transferred balances to which shows that if I make only the minimum payments it will take me longer to pay for than I am alive so I thought a Home Equity loan would be good to get rid of it in 10 years or less.  If I do this then how will this affect my credit score by getting rid of the credit card payment and adding on to my mortgages part?  I was doing so good last year and then I bought a car and a few other things and my credit scored dropped drastically and I really want it back up there.  Also, if I get a Home Equity loan should I only take out what I owe on the Discover card bill or should I take as much out and pay off as many bills as I can?  Most of my bills even paying the minumum I will have paid off within three years but as I said I want my credit score up there again and if getting rid of as many revolving accounts will help then that is what I want to do.  Thanks for any advice. 

Moderator Emeritus
Posts: 32,869
Registered: ‎08-04-2007
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Re: Home equity loan

[ Edited ]

If you got a home equity loan on the Discover card alone, wouldn't your minimum payments on that debt be greater than the minimum you currently pay on Discover [eta...because of the shorter repayment term]? If so, why not avoid the extra TL and just throw extra at it, which you'd have to pay anyway had you gone the loan route, to pay it down faster? What is the balance on Discover? What's the APR?

Member
Posts: 9
Registered: ‎08-26-2009
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Re: Home equity loan

Sorry I didn't give enough information.  I currently have a home equity loan which I would just refinance and pay off the Discover bill.  After refinancing the loan my payments would be close to what I am already paying for my home equity loan so the Discover card money would be free and clear to use elsewhere.  In my mind it would be a no brainer to get the HE to pay off the Discover card but I am worried about how it would affect my credit score I definitely don't want it to go down farther than it is now.  One year ago I was at 718 and in this past year I did major damage with my credit score and now it is at 632 (bought a car, tv, had to buy a new fridge, my daughter's PLUS loan, and received a CU credit card).  I just want to be out of debt in the next 10 years and making more than the minimum payments on the Discover card bill is tough with everything else. 

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Posts: 15,735
Registered: ‎07-14-2009
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Re: Home equity loan


tryintoimprove wrote:

Sorry I didn't give enough information.  I currently have a home equity loan which I would just refinance and pay off the Discover bill.  After refinancing the loan my payments would be close to what I am already paying for my home equity loan so the Discover card money would be free and clear to use elsewhere.  In my mind it would be a no brainer to get the HE to pay off the Discover card but I am worried about how it would affect my credit score I definitely don't want it to go down farther than it is now.  One year ago I was at 718 and in this past year I did major damage with my credit score and now it is at 632 (bought a car, tv, had to buy a new fridge, my daughter's PLUS loan, and received a CU credit card).  I just want to be out of debt in the next 10 years and making more than the minimum payments on the Discover card bill is tough with everything else. 


If you refi you will have a new inquiry and a new credit account will show up on your report and this could also lower your AAoA. All of these factors will probably lower your scores but how much is difficult to say depending on what the rest of your credit profile looks like.

 

I will ask the same thing as llecs. What is the balance and APR on that Discover card? And what kind of APR are you looking at if you do refi?

 

 

 

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

 


 

Member
Posts: 9
Registered: ‎08-26-2009
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Re: Home equity loan

The HE would be 6.99% or lower depending on the Credit Union and we will use my husband's credit first since his is so much better. The Discover card rate is 15.99% and I am totally embarrased to say the balance is $14,000. 

Moderator
Posts: 15,735
Registered: ‎07-14-2009
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Re: Home equity loan


tryintoimprove wrote:

The HE would be 6.99% or lower depending on the Credit Union and we will use my husband's credit first since his is so much better. The Discover card rate is 15.99% and I am totally embarrased to say the balance is $14,000. 



Don't feel so bad. I've had higher balances than this unfortunately.

 

You'll get different opinions about whether it's ever a good idea to trade unsecured debt for secured debt, If you do the refi and add more to your HE balance and if heaven forbid something really bad happens you are in danger of losing your home whereas with CC debt you won't face this. Plus if you pay off the Discover you must have the self discipline to not run the balance back up because then you'll be worse off than before. You'll have the HE loan plus the new CC debt.

 

I'm leaning towards one thing that llecs mentioned and that is using every extra dollar you can find towards paying down the balance on this Discover. While you are doing this DO NOT use it or any other card for any new purchases except a tiny amount every few months to keep them active.

 

15.99% is pretty high but not outrageous compared to many rates. You might have to cut back on your expenses for awhile. Don't eat out as much, perhaps no vacations for a year or so. Can you sell any items and use that towards the debt? Use any bonuses or tax refunds for debt pay down. Is it possible to get a part time job? Realize that short term sacrifice will mean long term security.

 

These are just one man's opinion and take that for what's it's worth. This is what I would probably do but only you know all the specifics of your situation. If others give you their thoughts and suggestions take everything in and then decide what you think will work best for you.

 

 

 

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

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