No. of Recommendations: 5
Dear Fools,

I am starting the process of focusing on getting my rates lowered. Here is a link to my current house of cards:

Chase is now paid off and will be in June's update. I am going to be patient and wait for the Chase pay-off to cycle through and show-up on my credit reports and FICO score before I apply for any new credit. I think this will take till mid to late July. I plan to BT a small amount ($2k) to Discover at 5.99% till 2010. Citibank is paid off and each month the offers get better. So, I am hoping for at least $4k there.

After moving those deck chairs around… BofA will still have just under $40k at 27.98%. This can still go down. But, every call has been “at this time we can not offer you…”. So, the BT game can go on and on as I try to get everything under 20% by the end of the year and then I think… what about a HELOC?

Well, a HELOC is bad. It comes from the depths of where Evil is spawn and it will cause you to loose your Foolish badge of honor. The problem is that I can not remember exactly what is so bad about a HELOC as it seems that by December I should easily be able to transfer $40k of 20%+ debt to a fixed rate of no more than 9% and maybe as low as 6% or 7%.

Why a HELOC sucks:
1) If we do not pay then bye-bye house. But, my state laws protect the home in BK and DW's trust would step in and make payments to save the house. Not to mention that I am mostly likely to pay the mortgage and HELOC before al other debts if it came to that.
2) We could become up-side down in our house. The market is bad and if we did need to move then this would be a big problem. But, we have been in the same area for 15 yrs and I have always been able to get a new job without moving.
3) We could have the problem of moving around debt and then running back up the credit cards. But, if that is the case then I will probably be a fugitive, divorced and living in another country running a gambling web site (or maybe a 7th Fire – eliminate debt now / cult web site).
4) What are the other reasons this is a bad option?

Why a HELOC sucks less than cc debt:
1) Tax deduction
2) Fixed rate – not subject to inter-galactic rates
3) Under 10%
4) Avoid much of the BT game of expiring rates, low limits, small mistakes that void rates, balances trapped at high rates after balances at low rates (all avoidable if you are very diligent – but, still a headache)

For the purpose of supporting a yes / no decision… please assume this would be done in December, a rate under 8% with a balance of $40k. Also, assume that Chase OD at 18% would be paid off by that time and the remaining $30k would be at an average mixed rate of 12%. My lowest credit score was 670 last month and it seems reasonable to get all scores close to or above 700. (Yea, lots of ASSumptions in there – huh?)

Yes, we have decided to not sell our house. That would net a nice profit and is the mathematically smart thing to do. But, we generally keep coming back to the conclusion that the community and school is more important than the house itself and all conversations are ended with “can't we wait 3yrs for the kids to move onto middle school and just how fast can we move back into this same exact community and school district”. That combined with the steady progress on our current course has lead to the decision that it is better for us to focus on other areas of change and improvement.

I know it is dangerous to “post out loud”. But, I am just pondering this with general figures for the purpose of forming a strategy for the 2nd half of 2007. If you have any feed-back I would appreciate it.

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