I Opened a Restaurant and Now Have a Lot of Credit Card Debt.

“Dear Damon,

Hi Damon,

I have substantial CC debt (approx $30k) due to opening a restaurant (which I have sold). I am current on payments, but would like to have the interest rate lowered with a debt consolidation loan.

Are there any companies that would loan with just a lien on my home instead of trying to re-finance? I have contacted the CC companies and they have lowered the rate as much as they are willing to – which is only 20%. My payments are going toward mostly interest!

Laura”

Hello Laura,

Yes, what you would be looking at would be a home equity line of credit or a second mortgage, which would be a separate loan on top of your existing mortgage. Whether or not you would qualify for one would depend on the amount of actual equity in your home, your credit and current financial situation. You could start by calling some local banks or mortgage brokers and have them give you an idea if you are in a situation where you might be able to qualify for a line of credit at this time.

However, even if you can qualify and get the interest lower, it doesn’t always make sense to trade unsecured debt for secured debt. If you are in an uncertain financial situation (aren’t we all these days) you would be taking on more risk by transferring all of your debt on to your home. You will have considerably less options to deal with the debt if your financial situation turns worse at some point in the next few years, if the debt is now tied to your house.

So you need to weight the benefits to the risks. You might also want to look into applying for a loan through LendingClub.com if you have good credit. The rates would likely be a little higher than on a home equity line of credit, but if you have good credit, should be substantially lower than the 20% you are paying now. This would allow you to pay down your debt faster without the risk and hassle of putting the debt on your home. Also the fees for a heloc or second mortgage would be significantly higher typically. So you would need to add the costs of those fees into the interest rate to get the true amount the new loan would be costing you.

Damon is a talented independent debt coach that provides in-depth assistance and consultations for people struggling with debt. If you want a personal debt coach to help you through a difficult situation or want assistance to find secret discounts offered by debt settlement companies I think Damon Day is an excellent person to contact for advice and assistance. He can be reached directly at DamonDay.com

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