Help with debt/improving credit

[ptatohed]

I've said this before.  Snowball only helps psychologically, not financially.  There is no cheaper and quicker method than avalanche - send as much money as you can to the highest rates first, while paying the minimums on the lower rates.  You'll pay off the debt quicker and save money.  

Step one is try to reduce your rates as much as you can.  If that means using an 8% HELOC to pay off a 20% CC, do it.  Call your credit card companies and see if they can offer a rate reduction or 0% period, etc.  Step two - avalanche.  

[Qdao823]

@ptatohed thanks! I was able to get a HELOC it's terms are ;  Prime Index + 3.875%, or 12.375%.  The interest only term is for 10 years, and then whatever the balance is after 10 years will be amortized for another 10 years, so in other words, it's a 20 Year Loan.  

cost for the fees is 5-8K depending on how much I ask for . Do you think this is worth that?? Would I be overall saving more by doing this. I could at least use it to pay half of the debt owed so I can get a handle on paying everything off all at once. Or do you suggest borrowing enough to just pay everything in full and then using that money to pay down the HELOC loan? (Versus using minimally fm HELOC so that I don't borrow it all and pay down the credit cards once they're like 50 percent paid off so that I can at least start chipping away at it?) 

Thanks so much for your help! 

[Citylights18]

If the OP has a HELOC of 100k it means they have a higher priced property and logically following that a higher income. So while the numbers look big they really aren't too bad all things considering.

I would also think with a higher income there would be a substantial 401k balance to tap into for a potential loan. That would instantly take care of the credit cards and permit avalanche payments to the the other loan products. Plus raise credit score for zero BT offers.

[Qdao823]

@Citylights18 I'm not available for 401K loan currently. I had taken out a loan already for a down payment for 1 of my properties. I wish I could! 

[Kforce]

Average APR = ~23
Total CC = ~45,500
Min pmts = ~1,655

Loan 46k + 8k = 54k  (Cover all CC's and max fee)
54k @ 12.375 with 1655/mo (same as CC payments)
3.33 years (40/mo) and ~12,170 interest

Current CC debt 45.5k @23% and 1655/mo
3.33 years (40/mo) and ~19,755 interest (Yes same time just poor interest)

Current CC debt 45.5k @23% and 2,255/mo
(26/mo) and ~12,500 interest

Need an extra 150 per card @ 23% to be close
to interest saved from loan

Financially the loan is a good thing.

The danger of yet another loan and if one can stick to a payment plan or

just keep getting deeper in debt, is another subject.

[ptatohed]

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@Qdao823 wrote:

@ptatohed thanks! I was able to get a HELOC it's terms are ;  Prime Index + 3.875%, or 12.375%.  The interest only term is for 10 years, and then whatever the balance is after 10 years will be amortized for another 10 years, so in other words, it's a 20 Year Loan.  

cost for the fees is 5-8K depending on how much I ask for . Do you think this is worth that?? Would I be overall saving more by doing this. I could at least use it to pay half of the debt owed so I can get a handle on paying everything off all at once. Or do you suggest borrowing enough to just pay everything in full and then using that money to pay down the HELOC loan? (Versus using minimally fm HELOC so that I don't borrow it all and pay down the credit cards once they're like 50 percent paid off so that I can at least start chipping away at it?) 

Thanks so much for your help! 

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@Qdao823 , first, please do all your own research and crunch the numbers yourself instead of relying on some schmuck on the Internet.    But, I can offer some ideas for you to consider.  

Before, I go on, I was stuck at the $5-8k you mentioned in HELOC fees.  I am confused.  What fees does a HELOC have?  I am not aware of any.  Especially if you already have the HELOC.  I've only had a HELOC once (I had to pay it off and close it during a refi several years ago) but opening it was completely free and when I drew $35k-ish from it to buy a car, there were no fees (other than of course monthly interest).  (there might have been an AF)  So, I am not understanding what you mean by fees.  Fees just to draw money from you HELOC??

Like I said, number one priority is getting your debt interest down by whatever means that is.  Do try calling some of your cards and asking if they can offer a rate reduction.  Balance transfers?  You can consider a personal loan if one offers a rate lower than your highest cards.  Etc.

As for using your HELOC to pay off your cards.  Ideally, you'd pull out enough from your HELOC to pay off any debts that have rates higher than 12.4% (which looks like is all of your CCs).  But of course, that was before I knew you'd have to pay thousands in fees!  That complicates things.  Now you have to do the math to compare HELOC at 12.4% + fees vs. leaving the CCs at their current rates; calculated over the time you plan to pay the debt off.  If your payoff period is shorter, leaving things as is might be favorable, if your payoff period will be many years, then the HELOC route might be the way to go. 

Also keep in mind that a HELOC is secured.  Your home is on the line.  If you are worried about defaulting at all, don't jeopardize your home with a HELOC.  If that is not a concern, then using your home to get you a better rate to pay off debt can be wise.

Lastly, do stop charging to your current cards!  

Good luck.  

[Qdao823]

@ptatohed thank you! I'll clarify on the fees but it's to fund the loan. I think it's a percentage of what I'm asking to borrow. i have a lot of work to do! I guess it's difficult bc  currently I'm not sure how long it would take me to realistically pay off everything. Also more difficult to secure a loan bc of the debts

[Qdao823]

@ptatohed they said the fees are 5% of the closing costs for the HELOC loan/line of credit 

[ptatohed]

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@Qdao823 wrote:

@ptatohed they said the fees are 5% of the closing costs for the HELOC loan/line of credit 

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Ouch!  I have honestly never heard of this.  Like I said, I had and used a HELOC once and there were no fees.  You already have this HELOC @Qdao823 ?  Or you will be opening it?  I had a ThirdFederal HELOC.  Which was (at the time) actually Prime minus 1.X%.  It looks like they are 7.49% right now.  How about acquiring a HELOC with no fees and a low rate?

https://www.thirdfederal.com/borrowing/home-equity

[Qdao823]

@ptatohed Thanks for all of your help! I would love that. I have applied to several other companies but it's difficult with the amount of debt I have and credit score high 600s.