Hi Steve, I have a $115K 30 yr mortgage at 5.25% and now have 20 yrs left. I also have almost $20K in credit card debt (13.5%) which is a minimum monthly payment of over $400, of which I usually pay more. This is killing me. I really want to get rid of this cc debt. I barely make a dent in reducing it with paying either the minimum or a little more.
Based on my situation above, would it be smart to look into refinancing and putting the cc debt into that? Also, I don’t want to start over again with a 30 yr mortgage so if you think it would be smart to refinance, would a 20 year mortgage be good or would my monthly payments go up a lot from what I pay now? Thanks so much!
The way you reduce what you owe each month is by reducing the interest rate, extending out the term of the loan or both. If you do refinance I’d rather seen you go to a 30 year mortgage but pay it back with a higher monthly payment if you can to reduce the term.
But it sounds like you don’t have much of an emergency fund or money in storage, AKA a savings account. Moving forward I’d rather see you get yourself in a position where you are able to reduce your debt and save money at the same time.
Refinancing the mortgage might make sense but it can be very expensive and those costs and fees will only increase the balance you owe. Before you jump at something like that I think it makes logical sense to explore a debt consolidation loan through LendingClub.com and see if you can’t get a lower interest rate to move that credit card debt to. LendingClub is a peer-to-peer lending network that can actually get you an unsecured loan, funded by people like you and me, to help you get out of debt.
Does that seem to you like a logical approach to take first?