A Date with Our Debt...

Talked to the husband the other day about the state of our debt. From our conversation we have decided that it is time to go to the bank for some assistance. I whined on about the needing to learn our lesson, and my level of embarassment for trying for our fourth consolidation loan, but he had some good points and I gave in.

First off, one of the home equity loans was not a consol loan (which I had always thought it was). It was a loan to buy our car, and our banker suggested this loan as opposed to a conventional car loan or financing. That was on our prior homes mortgage so it was eliminated when we moved.

Consol loan #1: 6 years ago $17000 - was a result of my final year of school and our first year in our new home. Yeah I had some credit card debt, but no student loans. Loan was taken out for 5 years, repaid in 1.5.

Consol loan #2: 2 years ago $60,000 (home equity)- this was a result of costs associated with our new home (ie. appliances, building upgrades, etc.) which we were told that we could add to our mortgage once the home was finished (I seemed to have forgotten that point). Granted there was some consumer debt in there (about $15,000), but the majority was house stuff.

Potential Loan: Looks to be about $90,000 when all is said and done - however, hubby made me tally up all the costs (both credit card and cash paid) to determine what money we have still sunk into our new home for landscaping and other improvements that increase the equity in our home. I am not completely finished going through the files, but I am currently at about $50,000 and I know that there is about $10,000 more in "cash" transactions where no receipt was given or my husband traded product for services. The consumer portion still exists, but it's making me a little less apprehensive about talking to the bank.

We have devised our plan of attack and have decided the following:

a.) We present the debt as equity expenses, and fess up that we should have persude a loan instead of our own "financing" efforts. Ask for a loan for the entire amount. Due to the dollar value, we are not expecting a positive response, but if you don't ask you'll never know.

b.) Propose that the debt associated with our home (the $60,000 or so) be added to our mortgage. Which is reasonable as our home was assessed last year (without any landscaping or driveway - which have since been added) at even higher than our mortgage plus the additional $60,000. I know what you are thinking, the market sucks right now, but where I am from it's still pretty solid and I have researched five houses for sale on the street over from my house (built the same year, and similar amenities) and they are listed for over $100,000 more than the 2007 appraised value of our home. We figure this way we can save on appraisal fees, and hopefully get a quicker answer. For the balance we were going to request an increase in our credit line. Yeah I know, this is dangerous, but if we have other projects, which we expect in the future I would much rather use a lower interest credit line and eliminate our credit cards all together.

c.) If this isn't feasible, see what we can get our credit line increased to and put the rest on our home equity.

d.) No dice - try b.) and c.) again with home equity and a conventional loan. The interest rate may be a little higher, but the overall interest will be lower due to a shorter amortization period.

e.) Go full boar on the home equity and work to pay down the priniciple as quick as possible.

f.) Go home.


Wish me luck!!