The Conservative Cave
Current Events => Economics => Topic started by: mrclose on March 09, 2015, 04:14:36 AM
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My parents have over a hundred thousand dollars in home equity but they also have around fifteen thousand dollars in various credit card bills.
Since they refuse monetary help from me, All I can do is search for other ways to help them!
One of the cards Sears Mastercard is killing them with $350.00 a month payments.
The other cards cost around $150.00 a month each.
Adding them up, the costs are around $600.00 a month in payments.
I scanned the following letter and would like to ask if what they offer would be a better way to go?
I would like for them to consolidate all of their cards into one payment and this offer seems like a good way to go?
Their income is roughly around $3,100 a month with monthly expenses (mortgage, electric, credit cards, phone etc. etc.) at around $2,200.
Looking at reviews for the company (bank), I come up with some good, some very bad.
Seems that an upfront application fee must be paid and isn't refunded if the loan is not approved!
Sounds like a good way for the company to make some easy cash?
(I had to reduce the image after scanning it .. from 2600 px to 800px so I hope it's readable)
Thanks
(http://i62.tinypic.com/2ns2tdu.jpg)
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JMHO NO...
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The only way to truly fix the situation is to change the spending behavior that caused the credit card debt to get out of control. Consolidation of debt to lower payments does not help if the behavior persists and will only get worse. If the consolidation occurs, the same level of payment are made, and no more debt is accrued, the principle will be paid down at a much faster rate.
The only honorable way to get out of debt is to pay your way out getting out from the huge interest payments via consolidation is a good way to kick start that. I suggest that you point your parents toward Dave Ramsey who gives such advice daily on talk radio and as written books about it. You probably can't change your parents' spending habits. They can if they take the initiative.
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I was going to suggest Dave Ramsey as well.
Suzi Orman is also good.
Baby steps and debt snowball.
Dave gives the same advice your grandmother would give but with his teeth in.
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I have sat with them and have told them the only way I will help is if mom (yes mom) hands over all the cards!
Another idea I have is to consolidate all the cards into a lower rate card and make payments on that.
Good idea?
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Draw on your line for 10 years.
Sounds like a credit card type deal, or "revolving credit line".
Do a 2nd mortgage AND CUT UP CREDIT CARDS or at least hold one credit card for them in case of emergency.
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Agreed with so many -- call Ramsey (I love his show and listen whenever I can).
In general exchanging high interest debt for low interest debt debt is not a bad idea (their credit rating is screwed anyway), but something tells me this has a LOT of potential dangers.
A lot of times these offers come around, but then they structure it so if you are late even by one day ONE TIME, the whole amount is due and THEN they either start legal proceedings (which they will win) or charge a massive APR (21% or worse). That little catch-up loan could cost your parents their house.
Unless you have a Financial Planner available to you I would not take the chance.
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Draw on your line for 10 years.
Sounds like a credit card type deal, or "revolving credit line".
Do a 2nd mortgage AND CUT UP CREDIT CARDS or at least hold one credit card for them in case of emergency.
IIRC Ramsey isn't into 2nd mortgages since CCs are uncollateralized and can be BKd where a 2nd Mortgage can flat you cost you your home.
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I have sat with them and have told them the only way I will help is if mom (yes mom) hands over all the cards!
Another idea I have is to consolidate all the cards into a lower rate card and make payments on that.
Good idea?
A good idea providing your parents cease running up debt.
If both your parents are over 65, a reverse mortgage might work. It would provide cash that would not have to be paid back and the interest on the mortgage would not have to be paid unless they moved. The fees are high which are deducted from the proceeds. It worked for me. However, I had zero debt and invested the proceeds in a rental beach condo. For some people a reverse mortgage is not a good choice. You may want to look into it.