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  1. #1
    Join Date
    January 17th, 2005
    We are considering taking out a home equity loan to pay off all our credit card debt. Our home is paid off, but we are spending a big percentage of our income to pay credit card debt, which never seems to goes down. We have received quote from Ameriquest and Aames. Has anyone done this before? What are the pros and cons?, alternate solutions? Thanks

  2. #2
    Join Date
    January 17th, 2005
    If your home is paid-off get a new first mortgage. Much lower interest and tax writeoff. Shop around for a loan broker. There are hundreds of those guys.

    Make the same payments to retire your loan.

    Next thing to do is cut up the cards. Get your bank to issue a ATM on your checking account.

    It works, takes some time. But feels good to be outa debt.

  3. #3
    ABW Founder Haiko de Poel, Jr.'s Avatar
    Join Date
    January 18th, 2005
    New York
    Hey Ken,

    Never done it ... yet ... but ... there are many obvious savings including the percentages. I would call as a consolidator and get a buyout figure from the creditors before you shell out the full 100%, many times the creditors will give you a deal and as long as your not behind and it is not registered as a "buyout" on your report, yet, you can save some money ... it all ads up! [img]/infopop/emoticons/icon_wink.gif[/img]


  4. #4
    Join Date
    January 17th, 2005
    There is some great info on this very subject here:

    Hope this helps..

  5. #5
    Resident Genius and Staunch Capitalist Leader's Avatar
    Join Date
    January 18th, 2005
    I would agree with Haiko about calling a consolidator... a consolidator can negotiate with your creditors while turning those bills into one lower payment--WITHOUT securing the debt with your home. Some consolidators (if not all) demand that you take the scissors to your cards, but that's better anyway because it's quite a debt trap to be able to keep charging while deferring the full payment on old debt.

    Getting a home loan to pay off credit cards is to turn UNSECURED debt (as in, they can't take your stuff for nonpayment) into SECURED debt (as in, a few bad months and it's Cardboard Box Avenue for you!!). IMO, that type of a switch is to be adamantly avoided!

  6. #6
    Join Date
    January 17th, 2005
    I did this two years ago and I think it's a fabulous way to consolidate and pay off debt ... my variable rate at the moment is 5.5% which is all deductible interest too ... you don't have to take a full mortgage amount out, and if you do it, I also recommend a line of credit loan - rather than a lump sum loan - where you can always use it again once it's paid down ...
    It's also nice for "big ticket" items like furnaces, appliances, etc...

    Like one of the other posters suggested, you are using your home as security and taking a risk - however, by consolidating your debt and taking out a mortgage, it's going to make it not only easier to pay on the bills (one payment) but the home equity mortgages are based on a 15 year (or so) payoff which makes your payments quite manageable and you'll see your balance going down a lot faster than with various credit card balances where you may only be paying minimum payments (and if you are only making minimum payments, you'll *never* get the balances paid down)...

    There are many sites with loan calculators where you can figure out your interest savings and payment amounts also ... go play with a few of those too before making a decision...

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