About a year ago, my husband was out of work for 6 months, and we had to rely on credit cards to get by. Now we’re stuck with $50k in debt, and it’s getting really stressful. We’re not behind on payments yet, but it feels like we’re close. We have around $100k in equity in our house, but my husband’s new job pays a lot less, and the minimum payments are overwhelming us. Our credit score is bad because of all the debt. Should we take a HELOC? Can we even get one with bad credit? I’m terrified that if we use the equity, the house value could drop, and we’d be in even more trouble. Bankruptcy isn’t an option because of the equity, and I’m just feeling overwhelmed. We’re paying about $1,500 a month toward this debt, and it’s crushing us.
Do NOT put your home on the line to pay off credit card debt. You could lose your house. You need to focus on increasing your income as much as possible. If you have a toddler and can’t afford daycare, you and your husband should work opposite shifts. Yes, it’s hard, but you’ve got to do what’s necessary. Also, learn how to budget and stick to it. Follow Suze Orman or Dave Ramsey, or read blogs about budgeting and debt payoffs. Get serious about cutting back and paying off that debt. Do not risk your home for this.
Is there a chance that the HELOC payments could become unmanageable? You don’t want to risk losing your house.
Neve said:
Is there a chance that the HELOC payments could become unmanageable? You don’t want to risk losing your house.
Yeah, it’s possible. It just feels like we’re stuck with no way out.
@Dallas
You’re better off not tying your home to your debt. If you default on your credit cards, they can’t take your home unless it’s secured against it. Don’t take that risk.
What’s your monthly income compared to your expenses, including the debt payments? How long would it take you to pay off the credit cards if you cut your expenses to the bare minimum?
Porter said:
What’s your monthly income compared to your expenses, including the debt payments? How long would it take you to pay off the credit cards if you cut your expenses to the bare minimum?
My husband’s income varies since he’s in sales. We’re barely breaking even right now. Our monthly bills, including debt, are around $3,800, and he’s making a little over $4,000. It’s not a lot of wiggle room, and any unexpected expense could throw us off.
@Dallas
Are you working? With such a small cushion, it might be worth considering, even if it’s just part-time. Also, are there any other expenses you can cut down? Be really careful with a HELOC. It could lower your interest rate, but if you don’t have a handle on spending, you could end up with more debt.
@Porter
I have a toddler, so any income I’d make would go to daycare. I do contract work from home when I can, but it’s not steady. I’m trying to figure something out before the work dries up.
Do you have any retirement savings? It’s not ideal, but sometimes you can borrow against it. You might also look into a balance transfer credit card with 0% interest for a while to help you tackle the debt without it growing. But if you do this, don’t use the card for anything else while you pay it down. Debt can be a tool, and you guys used it during a rough time. Now it’s about digging out. You’ll get through this.
Have you considered contacting a non-profit debt management company? They might be able to help by negotiating lower interest rates with the credit card companies. Check out the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). Just be careful and do your research to avoid scams. This could help you get back on track without risking your house.
Never use your home to cover debt.
Look into ACCC’s debt management program. They helped a friend of mine consolidate her debt and got her interest rates down really low. It might be worth checking out.
Can you post a budget? Maybe the community can help you find places to cut. You could also try driving for Uber, donating plasma, or selling stuff you don’t need. There are a lot of ways to make extra money, even little things like doing laundry for others or selling homemade crafts online. Get creative!
It sounds like you’re in a tough spot, but a HELOC could put your house at risk. Try to find other ways to lower the interest on your credit card debt or take on more work, even if it’s just temporary. You might need to buckle down and work extra hard for a while to pay this off, but it’ll be worth it to avoid losing the house.