“Dear Steve,
CC debt 20,000. Mortgage 39,000. Equity about 300,000. credit score under 500. marrried one income $51,000. 4 kids in college. Turned down from first bank for refinance with credit payoff. Currently spending about $700.00/month on CC payments.
should we continue to try to get a loan or should we take the money out of our IRA and pay CC then repay IRA 500/month. as of january we are now having to pay 260 for health insurance and we are now straped making min payments and getting no were fast!!!
Christine”
Dear Christine,
I am no fan of taking money out of protected funds, especially when you may have some difficulty in repaying them.
You said you looked at refinancing but what about a Home Equity Line of Credit (HELOC)?
I recently answered a question for a WRAL viewer in which I talked about the advantages of a HELOC and what to look for, read Should We Get a Home Equity Loan for Improvements? – Pam.
Your credit score is really low and most lenders are not going to touch you and with that much equity bankruptcy might be a problem, depending on what state you live in.
But with that much equity getting approved for a HELOC might be a lot easier. Talk to your current bank about it.
At the very least it’s an option I’d like for you to explore before dipping into the retirement funds. And if you decided to hit the retirement funds, come back and give me an update in the comments. I’d have a plan on how to deal with it.
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Thanks for the comment. Was turn down for heloc by 2 banks. Going for the IRA withdrawal
OK, before you do that I think we need to minimize the IRA withdrawal and think about settling the debt. I have someone who is willing to help you with that for free as long as they can anonymously chronicle your DIY debt settlement experience on the site.
If that’s OK with you, let me know. It’s a hell of an offer.