7

Planning on moving and getting our house ready to sell has been more expensive than I expected. I'd like to get this debt off of credit cards. What's the most cost effective way to do this?

  • Why do you want to get the debt off of your credit cards? There are lots of options, but without knowing why you want to move it it's hard to recommend one. – Sean W. Aug 31 '11 at 15:27
  • That's a high intrest rate I'd rather not carry until I can pay it down or until the house sells (not expected to be quick at this time of year and in this market) – DKnight Sep 2 '11 at 13:08
4
+50

You should look into a home equity line of credit:

A home equity line of credit (often called HELOC and pronounced HEE-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house. Because a home often is a consumer's most valuable asset, many homeowners use home equity credit lines only for major items, such as education, home improvements, or medical bills, and choose not to use them for day-to-day expenses.

  • From what I've read and heard most banks would not approve this for a home that is going to be sold - if the house sells quickly they won't make their costs back. I will call my bank and ask about it though. – DKnight Sep 2 '11 at 13:11
  • @DKnight Is your home already on the market? The main issue should be whether there is a prepayment penalty or some penalty for closing the HELOC before a certain date. – Tal Fishman Sep 2 '11 at 13:18
  • @sheegain: Not yet but if all goes as planned it should be within a couple of weeks. – DKnight Sep 2 '11 at 13:35
  • @DKnight then your main concern should be the terms of the loan, not whether being on the market disqualifies you for a loan (since you aren't yet on the market). – Tal Fishman Sep 2 '11 at 14:33
2

I'm assuming that when you sell the house you expect to be able to pay off these loans. In that case you need a loan that can be paid off in full without penalty, but has as low an interest rate as possible. My suggestions:

  • Look for a credit card with a low introductory rate, and transfer the balance(s) to that. When you sell the house off, pay off the card and tear it up
  • Get an line of credit. Can be secured (HELOC) or unsecured, as long as you can pay it off when the house sells.
  • For anything you haven't spent already, take advantage of any "no interest for six months" deals you can find at the places you are buying.
2

sheegaon's reply looks fine to me, a HELOC can usually be set up for a minimal ($50?) fee, and is currently a pretty low rate, mine is 2.5%.

If this doesn't appeal to you, my other suggestion is a 401(k) loan. While this is usually a last resort and 'not' recommended, a short term use may make sense. The rate is low, and you can pay in back in full after moving into the new house.

  • I need to explore this more - I've JUST switched jobs and am trying to determine what to do with my old 401k. I was going to roll it into a IRA with Vangaurd but I could roll it into my new 401k plan and pull a loan off of it. With the market so volitile I haven't wanted to pull anything out even for the week or so it would take to mail the check around though. Taking some out for even longer will require some consideration, but thanks for bringing it up – DKnight Sep 2 '11 at 13:31
  • Re: 401(k) - Find out if the funds can be transferred "in kind" to the new administrator. If the old one liquidates and writes a check to new one, you have the same issue of a gap. This is a tough one to get around. For some, a loan is small enough to be from the portion they have in bond/cash allocation, in my case I had tbill rate on those funds and the loan gave me a higher return TO the 401(k) as well as a lower rate than an external loan. If this isn't the case for you, back to the HELOC idea, although I pronounce it "hell-ock", FWIW. – JoeTaxpayer Sep 2 '11 at 14:41
0

In planning to buy a house, and sort out how to handle the costs of some initial renovations, I've been considering using Lowes and Home Depot credit cards (hopefully this will count differently than the typical credit cards I think you're referring to):

http://www.homedepot.com/webapp/wcs/stores/servlet/ContentView?pn=Credit_Center&langId=-1&storeId=10051&catalogId=10053

http://www.lowes.com/cd_Credit+Card+Accounts+from+Lowes_781778798_

You should definitely read the fine print first, as the interest rates can shoot up after the first 6 months if you don't pay the balance in full on some of them.

Also, Lowes has a project card that gives you the 6 month no interest (only a minimum payment), and you don't have to pay off the full balance at the end. This one even has more reasonable rates, so this could be a good way to go.

  • That's good info, but a good bit of the money is spent already and many of the improvements and repairs could not be handled by the stores or I could get a better product or price elsewhere. – DKnight Aug 30 '11 at 16:48
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You could take on more work. Pizza delivery, lawn work, babysitting, housecleaning, etc. None of those are much fun, but all are better than opening a credit card bill.

  • No offense but that's a horrible suggestion. I'd be killing myself working a low-paying job, away from my family. There would be a limited amount of time available to work so small paychecks slowing packing away at the principal while I'm still paying a high intrest rate in the mean time. – DKnight Sep 2 '11 at 13:27
  • No offense taken. Many people recoil at the suggestion that they work harder/longer. What you are really saying is that you prefer paying the interest on your credit card over working a low-paying job. That is a personal choice, and it depends on your circumstances. – Eric Sep 2 '11 at 19:47
  • @DKnight, while I don't think low-paying jobs are a good idea, any opportunity for a little overtime at work? Just a few extra hours can add the same pop to your checking as a weekend of pizza delivery. – MrChrister Sep 3 '11 at 4:52
  • Babysitting? I would report a grown man babysitting to the cops. =P – MrChrister Sep 3 '11 at 4:52

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