Need help/suggestions in reducing CC debt.

[Homerboy]

As long as you borrow at least $25,000, the rates would remain the same as what I indicated in my first email. The line of credit works similar to a credit card. As you pay down the balance, you can make advances up to the limit again. The minimum monthly payment required is $100 and there is an annual fee of $75.

Why does this just not seem right? I can get a line of credit of $25000, pay off all my CC debt and pay back the $25K at $100/month @ (a previously mentioned) 7%? Obviously I would pay more than the $100 but if it was a rough month or something unexpected pops up (I have 2 children that are perpertually ill with something) thats a nice safety net to only have to pay $100...

I know they say "If it seems to good to be true..." therefor Im pretty skeptical.

 

[Pantoot]

Originally posted by: Homerboy

As long as you borrow at least $25,000, the rates would remain the same as what I indicated in my first email. The line of credit works similar to a credit card. As you pay down the balance, you can make advances up to the limit again. The minimum monthly payment required is $100 and there is an annual fee of $75.

Why does this just not seem right? I can get a line of credit of $25000, pay off all my CC debt and pay back the $25K at $100/month @ (a previously mentioned) 7%? Obviously I would pay more than the $100 but if it was a rough month or something unexpected pops up (I have 2 children that are perpertually ill with something) thats a nice safety net to only have to pay $100...

I know they say "If it seems to good to be true..." therefor Im pretty skeptical.

The HELOC that they are pitching you is an interest only one, so you wouldn't really be paying back the 25k at all by paying the 100 (actually you would have to pay the interest on the loan, which would be more than 100.) Then at the end of the loan (typically 15 years) you would have to pay the 25k back (minus whatever you prepaid of course.)

 

[geecee]

Originally posted by: Homerboy

As long as you borrow at least $25,000, the rates would remain the same as what I indicated in my first email. The line of credit works similar to a credit card. As you pay down the balance, you can make advances up to the limit again. The minimum monthly payment required is $100 and there is an annual fee of $75.

Why does this just not seem right? I can get a line of credit of $25000, pay off all my CC debt and pay back the $25K at $100/month @ (a previously mentioned) 7%? Obviously I would pay more than the $100 but if it was a rough month or something unexpected pops up (I have 2 children that are perpertually ill with something) thats a nice safety net to only have to pay $100...

I know they say "If it seems to good to be true..." therefor Im pretty skeptical.

It's not responsibility-free. You have some equity in your house, so you can do a HELOC (Home Equity Line of Credit) but you are putting another lien against the house. If, God forbid, something happens and you can't repay your debts, you can be foreclosed upon by the primary mortgager or the second lien holder (HELOC), hence double the trouble. You will need to be able to keep up both sets of payments. That being said, it is a great way to get out from much higher interest credit card debt.

Another thing to consider is to get a card like a Discover, or something with a fairly long term low inital balance transfer interest rate offer and consolidate your debt onto that card (assuming it doesn't exceed the limit of the new card). Then cut up/cancel all but one of your other cards. Put the new card and the one old card away (for a rainy day) and just make the payments on the card you've consolidated on. When the interest rate goes up to normal, sign up for another low balance transfer offer and repeat. This way you won't be drowned by the interest and can actually make some headway into the principal. I wouldn't recommend this as a long term solution, but in the near term, it could be very helpful.

 

[kranky]

Originally posted by: Homerboy

As long as you borrow at least $25,000, the rates would remain the same as what I indicated in my first email. The line of credit works similar to a credit card. As you pay down the balance, you can make advances up to the limit again. The minimum monthly payment required is $100 and there is an annual fee of $75.

Why does this just not seem right? I can get a line of credit of $25000, pay off all my CC debt and pay back the $25K at $100/month @ (a previously mentioned) 7%? Obviously I would pay more than the $100 but if it was a rough month or something unexpected pops up (I have 2 children that are perpertually ill with something) thats a nice safety net to only have to pay $100...

I know they say "If it seems to good to be true..." therefor Im pretty skeptical.

Let's say the HELOC is 15 years. If you borrow $25K and pay it back over 15 years, your monthly payment would be $224.71. The interest alone would be $145.83 on the first payment, dropping slightly with each subsequent payment, so if you must pay at least the interest, that's where you would start.

Paying it back over 7 years would require a monthly payment of $377.32. Paying over 5 years would mean a payment of $495.03.

There's no catch, except that if you only pay the minimum (the interest) you are not making a dent in your loan. That's not good. You can factor in a slight tax savings because the interest would be tax-deductible (probably).

You'd have to run the numbers to see if it makes sense, but you might consider refinancing your first mortgage and taking the $25K out of your equity at that time. You'd have one mortgage, one payment that would be less than the two combined payments, and you might get a better interest rate than 7%. The savings might allow you to pay extra on your mortgage to build your equity back up faster.

 

[Dulanic]

Also do any of your CC have good BT rates? That can be a life saver sometimes. If all your cards are maxed, work on getting the one with a decent BT rate down, then BT some of the higher rate cards. If you have a BoA card they have BT's available no fees, and 0% APR for a few months usually then 3.99 after. Which is also better then just about any loan you can get. If you do have a card with a good BT rate but not enough credit on it, you can always ask for a increase, explain the situation, and that if they allow you to BT over some of the other cards, it will increase your ability to pay them back. It may work, it may not, but always worth a shot.

 

[Homerboy]

Well getting some rates back, and while not as great as I thought they maybe they are still MUCH lower than the CC's

Now the decision to make:

8.14% on $20K for 15yrs
and still have $5.5K credit card floating at ~18%

or 8.64 on $26K for 15yrs
and have no debt at all.

 

[ragazzo]

what about a federal credit union?

 

[FrustratedUser]

Originally posted by: Homerboy
Well getting some rates back, and while not as great as I thought they maybe they are still MUCH lower than the CC's

Now the decision to make:

8.14% on $20K for 15yrs
and still have $5.5K credit card floating at ~18%

or 8.64 on $26K for 15yrs
and have no debt at all.

I'm no expert here but 8.64% on 26k look decent right?

 

[Homerboy]

You'd have to run the numbers to see if it makes sense, but you might consider refinancing your first mortgage and taking the $25K out of your equity at that time. You'd have one mortgage, one payment that would be less than the two combined payments, and you might get a better interest rate than 7%. The savings might allow you to pay extra on your mortgage to build your equity back up faster.

In regards to that my current (first) mortgage has a balance of $147K @ 5.625%... so Im not to anxious to refinance that entire thing and have it bumped up to 7+%

 

[Homerboy]

I'm no expert here but 8.64% on 26k look decent right?

Yeah the rate is "ok" I guess... not great. Again better than the CC's.
Trick is do I take the 8.14 w/ debt still on a CC or do I erase it all at 8.64? I guess Im leaning towards the 8.64

 

[dullard]

Originally posted by: Homerboy

I'm no expert here but 8.64% on 26k look decent right?

Yeah the rate is "ok" I guess... not great. Again better than the CC's.
Trick is do I take the 8.14 w/ debt still on a CC or do I erase it all at 8.64? I guess Im leaning towards the 8.64

The latter option (borrow it all at 8.64%) would save you an average of nearly $25 a month. This of course assumes you pay off your credit card bill ($5500) in 15 years as well. Absent that data, we really cannot answer it exactly.

 

[Mill]

Homerboy, exactly what lender(s) are you dealing with here? 18% APR? Was that a standard rate or a default rate? Secondly, for your HELOC or Equity loan try out Lockheed FCU or Patelco FCU. You can search google for Lockheed Federal Credit Union, or Patelco Federal Credit Union. Because of your high utilization of available credit I'm pretty sure that your rates are not going to be all that competitive. You're at a high risk of defaulting.

Do you have any late payments with your credit card companies? How long have the accounts been open? Even though you are a high risk right now -- if you've had the card awhile you can talk to retention or even their executive office and see about getting the rate lowered.

 

[EagleKeeper]

An option to rduce the CC debt is to contact them and see if they will do a buy down of the debt.

If you have been getting nailed by the interest ovr the past year due to min payments, the CC people may be willing to close the account with no reprecussions for a settlement of 75-80% of the balance.

You do not need to inform them that you will be taking a loan out against the equity (ie where you are getting the money).

Just ask them if you can pay 75-80% of the debt off within the next 30 days, will the rest be forgiven without any negative impact. If they agree, get it in writing.

If everybody cooperates you can get out of $25K for the cost of $20-22K.

They key is that you may need to ensure that they feel that they are only loosing out on fees and comounded interest, no principal.

 

[Homerboy]

Well SOME good news.
I jsut got a letter in the mail that 122 Options I got as an ex-GTE employee are maturing in Febuary. So that will be a nice ~$5K I'll cash out on in 4 months. Sadly the original grant price was $56 and its at ~$40 now... so BUY VERIZON! in the next few months please!

Here's to hopefully VERY HIGH year end numbers for VZ

 

[Homerboy]

Originally posted by: Mill
Homerboy, exactly what lender(s) are you dealing with here? 18% APR? Was that a standard rate or a default rate? Secondly, for your HELOC or Equity loan try out Lockheed FCU or Patelco FCU. You can search google for Lockheed Federal Credit Union, or Patelco Federal Credit Union. Because of your high utilization of available credit I'm pretty sure that your rates are not going to be all that competitive. You're at a high risk of defaulting.

Do you have any late payments with your credit card companies? How long have the accounts been open? Even though you are a high risk right now -- if you've had the card awhile you can talk to retention or even their executive office and see about getting the rate lowered.

Citibank
AMEX
HouseHold Credit (GM Card)
Discover

These acounts all have ~5yr+ on them I'd say off the top of my head. All perfect standing until the last 18 months or so. The only late payment has been on the AMEX and that was just ~2 months ago. Every other payment has been perfectly on time, even if it was just the bare minimum.

I like the idea of calling them and askign to close the account at a lower principal amount. I don't see WHY they would do that though...

Edit: Oh and I did just submit a loan request from Lockheed FCU. Wells Fargo seems to be the front runner still at 8.64% and no closing costs. Hopefully Lockheed FCU can better them