$60K credit card debt (sick child had to quit job)
Should I look at pulling this from my IRA, 401K, or a loan against the mortgage?
Income is too low to keep up payments and I am hoping to prevent falling behind on payments.
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2Before we responsibly answer this: (1) do you know where all of your money is going? (2) Are you following a pretty restricted budget? (3) Have you gone back to work?– RonJohnOct 4, 2017 at 0:58
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It would also be helpful to have a country/region tag so we know what jurisdictional nonsense we are dealing with or applicable laws that might vary. Generally if you have a decent amount of equity, your best bet is to get a line of credit on that, usually fairly low rates, you should be able to easier manage its payments and can use that to pay off your big interest items (like credit cards) and that way you can save some money but again, without details it is a good faith best guess, backed by general applicability which might not help YOU personally.– GµårÐïåñOct 4, 2017 at 1:05
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@GµårÐïåñ the references to IRA and 401K indicate the USA.– RonJohnOct 4, 2017 at 1:13
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My budget is ridiculous. I have spreadsheets coming out my ears trying to slice and dice where I can cut corners. Income is almost enough to pay the bills but nothing left for discretionary items...like food.– Besty JaneOct 4, 2017 at 1:23
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2Another possibility you didn't mention would be to talk to your mortgage lender and see whether they would be willing to delay repayment (by however long you expect to be caring for your child and unable to work full time) and make interest-only payments during this deferment. This is profitable for them (increases the total interest you will pay over the life of the loan) and lowers your payment while you are in this crunch, giving you some breathing room in your budget. And shouldn't require any issuance fees, like you would pay with a second mortgage or refi.– Ben VoigtOct 4, 2017 at 4:22
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2 Answers
First of all I sympathize with your situation. I, too, would do anything for my children, and I can't imaging having to sacrifice as much as you have. That said, you have a big hole now and need to find a way to dig your way out.
Income is almost enough to pay the bills but nothing left for discretionary items...like food.
Food is NOT discretionary (restaurants are, but not actual food). That needs to come first. Then comes housing, then utilities. By utilities I mean electric and water, not cable, internet, and telephone. Those can be cut temporarily until you get out of the hole. You can't afford to be "comfortable" right now.
Look at local organizations for assistance. Many churches have food banks that can help with other needs (like clothes and utilities) as well. You might have to swallow your pride for a while, but you might find someone who can help you out.
Borrowing against the house or retirement funds does not solve the problem, it just moves the debt. It may mean a lower interest rate, but you need to jack up the principal payments somehow.
Cashing in retirements would solve the short term problem, but you're going to pay the price in the long term since you won't be able to retire until much later in life. Another drastic option is selling your house and finding a cheap apartment. That would be my last resort before bankruptcy.
You can survive by moving debt around, but you'll be paying payments the rest of your life. Hopefully you can find more work as your child's health improves and can rebuild your income, which is the only way you're going to get rid of the debt and thrive instead of survive.
answered Oct 4, 2017 at 13:24
If you're currently running a "lean" budget (and from your comment, it seems you are), and it would be balanced by a lower interest 401(k) loan or second mortgage, then yes, it seems a reasonable path to take.
I'd look for a home equity loan (aka second mortgage).
