Should We Put More Debt on Credit Cards to Finish the Basement? – Corrie

“Dear Steve,

We just bought a house six months ago and own $229,000 on it. We owe almost $35,000 in credit card bills and recently my full time job went to part time, so I am earning less than half of what I did a couple of months ago.

Since we just bought our house we can not get a home equity loan to help consolidate our credit card debt, but we were told that if we finish our basement, our equity in the house would go to $275,000, which in turn would allow us to get a home equity loan. Would it be smart to put another $5-7,000 on credit cards to finish the basement to get the equity in our house to combine all our debt into one home equity loan??

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.


Dear Corrie,

I’m not a fan of that approach. I’m concerned that even if you get the home equity loan to consolidate your debt all you are doing is converting unsecured debt to secured debt against the house. Through LendingClub.com you can still get an unsecured debt consolidation loan without using your house as collateral.

With the new home equity loan against the house and a reduction in income the chances would be greater that you would be unable to meet the new mortgage payment and could then more easily lose the home to foreclosure.

Then I’m worried how you would pay for the renovation on cards. With cash advances maybe? Yikes!!!! That would be horrible and the most expensive way to do it.

After all that, even in you do make the improvements, with the higher credit card debt and the lower income there would be no certainty you would get the home equity loan and where would that leave you?

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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