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@Anonymous wrote:
You have CC debt thats only $10k smaller than your mortgage balance and $160-170k in total debt with a $7-10k monthly income? Thats a big shovel and a medium pile so you could cash flow it easily assuming your lifestyle isnt eatting up your income. Try paying everyrting below 90% before snowballing to make sure an interest fee doesnt break the limit. Another option is an attempt to use any equity you have stored in your house to roll all of the debt into a lower interest rate and one payment, but if you have the ability to get agressive and throw $3-5k a month at the debt then cash flowing it may be simpler.
Since you said you have a new house with no mortgage, I would take either an equity loan or add a first mortgage and get myself out of that big hole (cash flow, and gross amount). If your idea is to pay everything off in 12 months, there is no reason you can't use an equity loan and pay much less interest than you will on card payments.
I also would not pay off low interest rate car loans to convert cash flow to high interest rate cards unless I was sure I'd pay off all the high interest rate cards quickly. In addition I'd close duplicate cards between you and your wife especially since you have a lot of cards you can always add each other as AU's on an account.
Bottom line is you have a big asset (mortgage free house) and a lot of high interest debt, make one work for the other - at least that's what I would do especially since a bank considers an equity loan as "secured" they will be more willing to approve the loan even with the high debt load you currently have.
Edit/Add: I'd also dump the AmEx Platinum - $550 a year AF for a $5k credit line?
I did an HELOC on my house last year for major remodeling and it was paid off. The issue with the OP, how bad can their FICO be right now? Even with great on time payments, those utilizations have to crush their FICO. I know from playing around with my credit cards it is easy to kill your credit score by 50 points with a utilization over 90%. Not to mention overall utilization that high.
The other thing I asked when I was getting my HELOC is what another major factor, and my banker said DTI should be under 20%. Not sure how others work. I got my HELOC at 3.5% and fees of $300 for 7 years interest only. (Not paying only interest of course.)
I really would find it hard to think they could get an HELOC loan anytime soon with those utilizations and DTI. But if you could, that would be a major win to get those CC under control.
I know the OPs FICO may be tanked right now, but going into a bank and using land and a new house as collateral to pay off debt which would significantly raise his scores makes sense to me. The lending banks interests would be guaranteed by your new house and land. You may get a high APR, but once you use the money to wipe out 99% of your debt, your score should rebound significantly as long as their are no other skeletons in the closet. Once your score comes back, refi the loan to a much lower APR and make double (or more) payments and you should be able to make faster progress on being debt free.
Highly recommend closing some accounts so you don't end up in the same predicament again. (It's easier than you think!)
best of luck!
Sorry, no clue how to make that format right with the quote.
The OP stated already that defaulting is not an option on any of the debt and is looking for options. While you are correct that one should never use the house for collateral, for unsecured debt, the OP has already used at least $10K of the credit cards with upgrades to the house. I am not familiar with some of the credit cards, but my guess it is probably a lot more than the $10K that is easily spotted.
See, I did the same exact thing but in reverse. (Except only spent money to upgrade the hosue on my CC.) I did a huge renovation and I took out the HELOC in preperation to run up my cards for the cash rewards and then just used my HELOC to pay them off. How is that different if the OP pays off half that debt and then gets a HELOC? My assumption the OP would have to cut that CC debt in half just to fix the FICO.
With most HELOCs, you pay interest on the draw period. Most I believe run 10 years, than another set time frame to pay it off. Interest only on a $30K HELOC at 3.5% (prime) will run under $100/month.
In a year's time, the OP would save $6K just in interest alone of $30K at 20%.
I am in no way encouragint the OP to do this, just showing the option to do it. Way better to do that than something like LC or Propsper down the road.
@Anonymous wrote:
Sorry but that's not good advice. Your asking OP to make insecure debt into secure debt with their home. What if the unthinkable happens and they fall behind then they will be in a much worst position of becoming homeless. Never use a HLOC to pay for unsecured debt, it almost no never makes sense.