How can a debt consolidation loan that also includes home repairs and will reduce monthly costs by $650 be bad

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I checked out the loan and the interest is not too bad giving that this is a second mortgage that gives money for repairs and pay offs. The only thing I see is that it eats up all the equity and we will need to live in our home for at least 15 years before trying to sell…so that alone is the biggest decision. I am just wondering if there is anything else I should be looking for???
Thank you for the advice. The rate is 9.5% Fixed for 15 or 20 years. There is no pre payment penalty.

We have only had our mortgage since April 2007 (238k @ 6.75) . We have 11k in credit cards mostly around 22% interest, plus an old loan for 12k (26% interest), we have no equity in our home since the market sux for us right now. Should we just do the rob Peter to pay Paul game til we get the cards paid off with balance transfers & what not to 0% cards? Should we refi & get cash out but pay 5k in closing costs & have 6.25% on first & 13.3% on second? Help..we’ve falling & we can’t get up!

8 Comments
  1. Reply
    kindclinton2000
    February 11, 2011 at 6:51 am

    It’s not bad, but it could hurt your credit standing for awhile and you won’t be able to use credit cards.

  2. Reply
    boldkevin
    February 11, 2011 at 7:36 am

    Is it an adjustable rate/ That could be very bad. additionally, what is the rate? Is it very high (2 Percentage points above the national average) if it is you are paying too much. Are there any loan costs, how much are they? more than say 2 percent of the loan?
    Is it a 15 year prepayment clause? can you not prepay it for 15 years at all? that is bad as you may want to move.

    There is a lot to consider. Your equity will increase because house values increase with time, but an adjustable rate mtge is a killer. also, if the rate is to high, shop around, you may do better,
    Try gettinga loan directly from the bank. they are usually cheaper than a broker, and they tell you alot more about your eligibility , credit scores etc.

  3. Reply
    Mee
    February 11, 2011 at 8:17 am

    9.5%! That’s a lot! Is it through a reputable lender? Make sure that the lender you are using isn’t a scam artist and check ALL the fine print.

  4. Reply
    morris
    February 11, 2011 at 9:00 am

    Around here you can get home equity loans for 7.7% today. The bad thing is that you are going farther in debt for a longer time. You are also giving up you share of ownership (equity).

  5. Reply
    Donna J
    February 11, 2011 at 9:57 am

    Do balance transfers to lower rate cards. I just saw one for 4.99 until the balance is paid off, that is pretty good.

  6. Reply
    malakit
    February 11, 2011 at 10:28 am

    Total of 23k at 22% & 26 % credit card will take you 30 years to pay if you pay only the mininum. Open two credit card with 8-11% rates and transfer the balances and don’t charge anymore until you payoff the balances. Spend less and less good times otherwise you’r on your way to bunkrupcy

  7. Reply
    5_for_fighting
    February 11, 2011 at 11:18 am

    Budget, budget, budget. Until you come up with a written budget, you will continually find yourself in this situation. If you consolidate the debt but don’t change your habits, you will end up with a big debt consolidation and just as much credit card debt. Refinancing is a bad idea because considering the mess you find yourself in, your interest rate could go up and you are going to add fees because of your refi. Since you have no equity in your home, you won’t be able to get a HELOC or home equity loan.

    Get yourself on a written budget, roll the high interest rate credit cards into lower interest rate cards, and get those debts paid off. Don’t borrow any more money or you will just be spinning your wheels.

    If you have $ 1000-1500 in an emergency fund that you only use for emergencies, this whole process will go much quicker. The problem with people trying to pay off debt is that they often times forget to set aside an emergency fund. When an emergency pops up, they have to borrow more money which bogs down the whole process.

  8. Reply
    dolly blaine
    February 11, 2011 at 11:57 am

    Credit card debt is an inevitable reality for most of us. Unless born with a silver spoon in the mouth, we find it pretty much difficult to keep up with the credit card repayment schedule, and the result is a good hefty credit card debt. Things go worse if the credit card debt is attracting high interest rates and causing further burden. Paying the monthly minimum is one of the options which we all find shelter in and this makes things even more disastrous. Is there a way out? Definitely yes. If you haven’t already heard of credit card balance transfers, read on.

    Credit card balance transfer is a process by which we can transfer our outstanding balances on a credit card (which are generally at high interest rates) to a low interest rate credit card.

    Balance transfer has some good advantages let us look at a few of them.

    Balance transfer is one of the best methods to get rid of that credit card debt. When you transfer balances all your outstanding balances are wiped out and transferred to new credit card.

    Depending on what deal you get on the balance transfers the new interest rates on transferred balances could be 0% or a low rate for a particular period. The ideal situation should be to get all the balances cleared within this low interest rate period. Read more from: http://www.credit-card-gallery.com/credit_card_balance_transfer.html

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