Should we take the money??

[Coronita]

[quote=harvey][quote]Bad idea shifting insecure debt to one that is backed by your primary home.[/quote]

So should they start making extra mortgage payments with their credit card?[/quote]

No. First ,we don’t know if they have credit card debt. But let’s assume that’s the case for argument sake.

If the couple has no savings. Then you have to look at the what’s the worst that can happen if a large financial misfortune happens (such as a job loss)

Option 1. Pay off credit card with heloc. Experience job loss. Ok great. Credit card company appreciates that.

Now what? You need money for food, you need a place to live, and your heloc is now maxed out so you can’t borrow against it anymore. Then what? Borrow against your credit card at 20+APR% to buy food?

Option 2. Continue to make payments on your credit card (adding more principal if possible). Then experience job loss. What’s the worst that can happen if you stop paying your credit card bills?

Ruined credit..Ok fine…But you still have a home to live in, you home isn’t immediately in jeopardy from your job loss, and worst case if you need survival money after maxing out your credit cards, you can at the very end then tap into to HELOC. You’re buying yourself time to get back on track minimizing your risk of losing your home. You’re buying yourself time so that you can put your home on the market and sell at a very very good price if you’re economic situation really doesn’t improve, so that you aren’t a desperate seller that suddenly has worry about NOD’s.

Credit card companies can call all they want to try to collect on you. They won’t go after your 401k and they won’t go after your primary home.There’s a reason why it’s an insecure debt, and why it will more or less get renegotiated at some point in time.

The reason why many people open a HELOC line of credit is specifically for emergency use only. Because when you’re jobless, payless, and need to bridge any sort of short term expense, you won’t be able to borrow any money at a cheap rate in the short term. For someone that is financially strained, they should have that emergency lifeline available at all times.

[fun4vnay2]

I was in similar situation
I bought in early 2000s and sold in 2006.
I bought again in 2011 but not thinking about selling it now as I need a place to live
housing market is kind of bubbly right now

[FlyerInHi]

[quote=flu]
Credit card companies can call all they want to try to collect on you. They won’t go after your 401k and they won’t go after your primary home.There’s a reason why it’s an insecure debt, and why it will more or less get renegotiated at some point in time.
[/quote]

Yes, true.

Maybe this family should do strategic default on the credit card debt. It’s unsecured so there’s no collateral the lenders can take.

The credit card companies would have to sue to get a judgment. But even then, they can’t get blood out of a turnip.

[FlyerInHi]

[quote=rockingtime]I was in similar situation
I bought in early 2000s and sold in 2006.
I bought again in 2011 but not thinking about selling it now as I need a place to live
housing market is kind of bubbly right now[/quote]

Housing a little bubbly now… but mainly because of inventory constraints.

I would sell if developers started building en masse again and people were camping out to buy.

[lpjohnso]

You all are so awesome. I can’t begin to tell you how much we have gotten out of your posts and how much we appreciate all of your suggestions and support.

We will definitely check out that website. Thanks for sharing.

-Only have $5,000 credit card debt, but the rate is 20%.

-$50,000 in student loans, all federal so rate is nice and low at 3-4%. Payments are $400/combined per month.

-Car payments…here’s where we’re taking it in the behind.
Payment for 2014 Honda Odyssey is $440/mo on a 4 year lease.
Payment for owned 2013 Toyota Prius is $667/mo. at 10%. (ok, you can all stop laughing now. My pride was already limping around, and then I had to expose that).
So, car payments=$1100/mo.
Originally the loan for the Prius was for $38,000 for the $27,000 car. This is a result of a series of trading in new cars every 1-2 years and rolling the losses into the new car loans. Never do this. Duh, I know, right? Well, now we owe $27,000 and it’s worth $18,000. No one will refinance or let us trade it in because we are so underwater. That is a huge part of the “chipping away at debt” that I was talking about. We need to continue throwing as much extra money at that damn car to get rid of that ungodly payment that is slowly sucking away at my soul.

And yes, we DO have 3 dogs too many.

[fun4vnay2]

Thanks,

Yeah, this time seems to be indeed different.. 🙂

Looking back, I got lucky two times in the last 15 years..

[lpjohnso]

Very lucky, rockingtime!

[an]

Since a big portion of your debt is student loan and car payment, I would do a cash out refi to pay off those two things. Since you’re paying for the refi anyways, might as well take out enough to pay off the credit card @ 20% as well.

[lpjohnso]

I like to think I can possess financial maturity and will power. However, my 5 year prediction with Option #3 is that the equity has been spent and I have twice the debt that I have now.. :/
Where I lack in self constraint and good decision making, I make up for as a super fun person to go to Vegas with.

[outtamojo]

Are they still offering those 0% 18 month balance transfer
credit cards? When we had a revolving debt/car loan we rolled everything over into 2 or 3 of those and paid things off without paying any interest at all – just be sure to roll it over to another 0% card or pay it off 2 months or so before introductory period is over.

[an]

Something tells me that if they only qualify for a 10% car loan, they probably won’t be able to do a 0% balance transfer app-o-rama.

[all]

Selling a house in order to keep buying new car every 2-4 years does not sound like a great idea.

You might not like spdrun’s model of driving 20+ year old cars, but is 2013 Prius really that much better than 2007 Corolla? And the lease on Odyssey is close to what monthly payment would be if you just bought new.

[lpjohnso]

[quote=outtamojo]Are they still offering those 0% 18 month balance transfer
credit cards? When we had a revolving debt/car loan we rolled everything over into 2 or 3 of those and paid things off without paying any interest at all – just be sure to roll it over to another 0% card or pay it off 2 months or so before introductory period is over.[/quote]
This is a great idea. Just must be very disciplined about it, like you said.

[lpjohnso]

[quote=AN]Something tells me that if they only qualify for a 10% car loan, they probably won’t be able to do a 0% balance transfer app-o-rama.[/quote]
This could be very true. However, our credit is better now than it was a couple of years ago.

[lpjohnso]

[quote=all]Selling a house in order to keep buying new car every 2-4 years does not sound like a great idea.

You might not like spdrun’s model of driving 20+ year old cars, but is 2013 Prius really that much better than 2007 Corolla? And the lease on Odyssey is close to what monthly payment would be if you just bought new.[/quote]
I’m totally down for the 2007 Corolla.

[Author]

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