I need advice again

I have about $16,500.00 debts right now. This includes two personal lines of credit (one was used to pay off a car loan that was at a higher rate)and the other is leftover (I got stuck with it!) from a divorce.The rest is all credit card debt. Nothing is maxed out. I make higher than minimum payments each month. I have nothing saved for an emergency. I pay all of my other bills on time and do have a little bit leftover each month (very little). My car is old and I think it may last another year. I only have one. I have a house and the payments are less than renting would be.

If I get a HELOC loan of $20,000, I could pay off everything and my payments in paying that back would be less than if I pay on each thing like I am doing now. My credit score would go up. But the HELOC is an adjustable rate with a teaser rate of 5.99 for the first 3 months. After that it goes to 8.5 until it changes again and could get much higher than my other interest rates on the current debt.

If I take out a second mortgage for the same amount, I could pay it all off. The payments to pay off the second mortgage would be half of what I am paying now. The rate would be fixed at 9% for the term of that loan which would be 15 years.

My highest credit card interest rate is 21%. My lowest is 8.9% and it has the highest balance. The HELOC and second mortgage interest is a tax deduction while the credit card debt is not. What should I do?

I don’t know what a HELOC loan is. I think it depends how much you have left owing on your mortgage. I have a problem with taking out a 2nd mortgage on a house. I just think your mortgage is first priority and personally, I just couldn’t do that. A mortgage is something you want to get paid down fast – not add to it. I’m sure others will disagree. If your credit score is good now, would this one consolidation loan really hurt it that much – especially if you are confident you can pay it with no problems? Can you skim just a little off your payments you are making now if you are worried about having nothing saved? I think I would seek counselling for the best advice because a 2nd mortgage is a big step and I can’t help but think that would affect your credit score as well.

I am thinking that the HELOC is a good idea just to get out from under the 21% interest. On the other hand, I don’t like using the house to secure a debt. Is your job secure? If you pay a bill late, tough. If you pay a HELOC late, you could lose your home.

Still, consider if you could pay if off sooner rather than later, you could get out of debt and beat the interest payments.

HELOC is a Home Equity Line of Credit. You are borrowing from the equity that you have built up over the years of paying on your mortgage. The interest on these loans is tax-deductible and the loan is secured using your home. If you default on the loan, the lender can and will take your home. Supposed to motivate you to keep up the payments on time I guess.