I received a letter in the mail from Embrace Home loans offering to consolidate my debts.
I did a little research so far and can’t see anything negative about the company. They have an A+ rating with the BBB, and shows they are in good standing since 1983. I found a few blogs from people using it and they seem to have no issues with it. So it got me thinking and I took a good look at my books.
My situation: I purchased a home last year, made a lot of improvements to it and I am sure it will appraise for well over what i have invested into it. I checked my credit report and it is good, but not the numbers I wanted to see. I have no late or delinquent notices on my reports
I made some major payments on my 24% credit card and that will be paid off this month. The other one is @ 9.24% which isn’t bad but I carry a $4,200 balance on it. I don’t intend on putting any more balance on that, just keep paying it off. I supposed I could call them and ask them to lower the rates, but I don’t intend on using the cards anymore but it would still be smart to try to lower it to pay it off better. I also have a school loan outstanding @ %3.37. Which is good. My car payment is @ 8.99%. My mortgage rate it 5%. With the exception of that one card, which I am sure I could ask them to lower it, my interest rates are rather good I think.
I have about $1200 worth of medical bills I need to pay for from my accident in the fall. I also have plans to build a garage at the house in the spring. I est about $16-$20K for that building. I would also like to purchase a lift $2K or so, and some more needed tools, Plasma cutter, newer MIG and some other fab tools maybe. Also I think I may be having to pay a bunch in taxes this year, because I failed to save the money I made on the side that is going to be taxed.
If I were to take advantage of this program I stand to save $600+ a year in interest with consolidating my auto loan, credit cards, and even putting my school loan into this (even though its currently 1.7% lower atm). My car would be paid off, my school loan would be paid off and my credit cards would be paid off. I would only have to deal with making one payment a month instead of 4, (2 really are manual the others are auto paid). And it will help me keep my checking account in balance with only having to watch for 1 deduction a month instead of 4 spread out.
With the garage, tools and outstanding bills, those can be rolled into this program too. Now I understand that I can also apply for a home equity loan which is basically the same thing this program is doing, and it would be at the same %APR. But I think it would be better that way to have it with the same lender, credit wise. But would that path allow me to pay off my credit cards, auto loan, school loan, also?
My wife, probably wont like me putting my bills into the house payment (our payment) so I might have to put the garage on a home equity loan and do my debt consolidation on my own.
This is my first house, and I am not up to par on my financial knowledge, and I know a bunch of you here are and could give me some helpful advice.
My questions are:
Will a home equity loan allow me to put credit card balances, school loans, auto loans, minor outstanding bills, tax payments and the garage into one loan?
With moving that school loan into the consolidation program be a dumb move making it increase %1.7? Is it better to keep paying it off as is or just pay it off completely with this program?
OK so since it’s a home equity loan (and not home equity line of credit (HELOC), I’m assuming this is for a fixed amount (adding up all the $ you owe, plus your mortgage) at a FIXED rate. If it’s a HELOC, the interest rate can usually vary, especially if it’s open ended (where you have the option choose when and how often to borrow against equity). Either way, BEWARE and read EVERYTHING, like three times.
“Embrace” Home Loans? Yeah, more like embrace your lawyer 'cause you and him are gonna be real tight… :lol
Anyways, I’ve had a relative and couple of close friends burned by a home equity loan, but in these cases the fine print is really what killed it, as the interest rate crept up and things got out of control quickly. You don’t mention what the actual rate is, but I assume it’s somewhere better than those credit cards and maybe slightly better (or maybe worse) than your car payment rate. This is kind of beside the point but I’ll throw it out there.
The way it sounds, your outstanding debts right now are unsecured, meaning that the bank is kind of lending you money in good faith with no collateral attached to the debts. I’m referring to your car payment, your credit cards, school loan, etc.
When you take out equity against your own home, you turn that equity (and therefore part of your home) into collateral, turning this unsecured debt into secured debt. For me personally this kills it right there, because should you default on any payments, now this lender can go after you for the collateral (your home).
For the next part, don’t take this the wrong way as it’s just an opinion and none of my business really, but you put it out there so here goes…
If you do not have an extremely stable job and don’t have at least an “emergency” fund worth a couple months living expenses, it sounds like a risky proposition to me.
As for the other stuff I highlighted above (lower half really), it sounds to me like you don’t have tremendous discipline financially, especially if you have credit cards at high interest rates with balances on them and have to pay back taxes on “money on the side”.
I am going out on a limb here and assuming you don’t have a lot of $ put aside for an eventual emergency because if you do, why is it not being used to pay off the other debts at relatively high rates? (You don’t have to explain, this is just me thinking out loud)
The way this is written it sounds like you’re tricking yourself into thinking you are “saving” $600 per year with this home equity / consolidation deal but the truth is you have certain wants (who doesn’t?), but are describing a nice garage and extra tools as a need, and then thinking this will help you better “afford” them?
You NEVER save money by spending money.
I would vote totally against buying these niceties and for not turning unsecured debt into secured (where your home becomes collateral), primarily for the reasons mentioned above, not to mention your spouse is against it. My opinion is, borrowing against your home equity is something to be done only when it’s a total emergency and/or you are doing it for future financial gain (i.e. you already maxed out student loans but are borrowing money for another degree that will help you earn more in the future)
Again, you put it out there so I’m going to comment, but are these things really worth arguing with your wife about at the end of the day? That’s on you to decide I guess…
You’ve done a good thing keeping your payments up to date and stepping up and buying a house and all that… I would just hate to see a bunch of ill $hit happen just because of some mail solicitation and a desire for a a garage, and some fancy tools.
im so far ahead on all my monthly installments that im not really worried. ive never been very deep in “debt” and certainly havent lost control of my spending.
and old housemate of mine got in hot water after his divorce, something like 80k in cars and credit card debt that he got stuck with. i think he tried the consolidation loan thing, not sure it worked though.
And something that hasn’t been said yet is this. Yes in interest you are saving $600 year. But what you aren’t realizing is that you are going to end up paying MORE in the long run because you will be longer on the payments you used to have.
For example:
You have $4,000 in CC debt at 24% interest. You have a $20,000 car loan. You could technically pay off the CC in a year and the car loan in 4 years.
If you consolidate those loans, you now have $24,000 you are paying off over a new term, I am going to guess 5-6 years.
So if you paid the credit card off in one year you would pay $960 in interest. Now since you are paying it off over 6 years at lets say 6%, you are now paying $1440 in interest.
Onto the car. If you were to pay the car off in the original 4 year contract at 7%, you will pay $4,600 in interest. Now since you are paying it off over 6 years at 6%, you are paying $7200 in interest.
You WILL end up paying more. Is it easier to pay one bill? Yes. If it worth losing thousands or even hundreds of dollars for? No.
Not to mention this is a very risky move in this job market. You will be using your house as collateral and there are a million things that can go wrong where you could lose everything.
The rate was 5%. Which is the same as my mortgage.
That I was not aware of. Like you said that right there will stop me with this plan. Just the risk involved, that I didn’t know of is not worth it like you said.
I am not taking it anyway buddy, I asked the questions and put myself out there because I am looking for answers and have no problem sharing some personal information to get on the right track… Plus it might help others out that might be in boat too, who knows.
My job is rather stable. And you’re correct, I spent a lot of money poorly this year. A lot of things came up rather quickly and I should have thought more before I jumped on some stuff. It’s a learning experience and I am working on that now.
Your correct. I spend money sometimes like it’s going outa style! I am not ashamed of it, it is what it is. I ran into some bad luck and had a lot of things break that needed fixing all in a short period of time. The money I did save got blown to keep up. I am working on digging myself back out. The biggest thing was a job change, that I stepped backwards a little in pay, but made up for it with stability.
I am not trying to trick myself into getting what I want, and can’t afford. I am thinking in the long run actually, and making sure I can do what I want to do. I understand that the $600 less a year in apr isn’t squat in the big picture. I was looking at it, thinking that being able to pay off my debts to the lenders would lift some pressure from my shoulders. I have 2 years left on the current auto loan, the school is pushed out for a long time and the credit card could technically be indefinite. If I put it all into a loan that was 5 years or so, it would even out I think, and even with the extra 3 years + on say the balance of the auto loan and my projected payback on the credit card. The convenience of paying all those bills off with a single payment would be helpful to me because I haven’t had a good track record of planning in advance for things.
I think the best thing I can do at this time is pay off the small balance on the 24% card… its only $255. Then ask them to reduce that APR just because. The best thing I did was destroyed the 2 credit cards I have open. That way I can’t possibly put any more debt on them. If for some reason I had major problems and needed to I could ask for a replacement card. The second card at 9% I will call up to see if there is a way I can drop it a bit more. I have made some good progress in the last year or so with my debts. A lot of the money I made on side projects and what not I put %100 into paying down my debts. I will continue to do that too.
I will just keep paying my personal debts as they are, and just do the garage between Steff and I under the mortgage. Like you said the lift, and tools are wants, your correct. But all of those things are long term investments. The major tools I purchased in the last few years, I will keep for a long time. The side work I do, pays for them. Each one I purchased was used with money I made from a project, there was very little out of my paycheck going into them. The only thing I need to pay for to build the garage is the materials and the concrete slab… the excavating and construction will be done by myself. All the remodeling to the house was done at a materials cost also, and because of that I am way ahead on that.
I want to give you a big thank you for the time you put into that reply. I really appreciate that.
I didn’t really want to do this but I will anyway. it’s not a big deal.
Credit cards:
$4,222 on one @ %9.24 $390.11 a year interest I have 37 payments left to make. So 3 years
$259 on the other @ %24 $62.16 a year interest forget this its paid off this month.
school loan:
$5,965 @ %3.37 $201.02 a year interest. I have 74 payments left to make. So 6 years
car payment:
$11,130 @ 8.99% $1000.58 a year interest I have 34 payments left to make. So 2.8 years
So take the car payment 34 months left and lets use this as the projected time to pay off the above debts. $21317 total If I took that and projected to pay it off in 34 months, I would pay about $3197 in interest @ %5.
If I left it as is, in order I would pay $1170, $1200 & $2801 in the time it would take to pay them off. Total of $5171 in interest over 6 years.
Debt consolidation services don’t sound like an answer to me. Too much fine print and other crap they are trying to hide to make your worries go away.
Make bigger payments on your credit card if you can and obviously like you said, stop using the card.
Your car and school, continue making the minimum balance required and then when your credit card is paid off, take that money that was going towards the credit card and throw it at your car or school loan.
It sounds like the garage you want to build is more of a want then a need. I would hold off until your financial situation is a little more stable and you don’t have as many bills.
Yeah I hear you on that. If I were to go that route, I should pay off things in the order of intrest rate & ballance. so pay the heck out of my credit card to zero that out then work towards the car payment, and leave the school for last since its a 3.3%
I am staying in the house for a long time. the garage space is needed for projects, not only my projects. Also with the lift I can do alot more side work to pay for the lift itself and my debts. I have alot of side work people want done, but I dont have the resources to get them done. Granted I am not making a living off these but as i see it, it is paying for my stuff in the long run. So when i am 10 years older, i will have everything I need and will be set.
I see where your coming from but if you have all of your other debt paid off purely based on your income from your real job, you can then focus on putting up a garage with more of your cash rather then the banks money.
I’ve always very good credit because I’ve been able to manage my money pretty well. I do have some debt, but I’ve taken the right steps to keeping it totally under control and of them is by this:
I’m also a homeowner myself and I took and still take advantage of interest free financing credit cards for Home Depot and Lowes. I added approximately $10,000 in improvements on my credit card and didn’t pay a single dime on interest simply by taking advantage of 0 interest for a year. As long as you map out what your going to pay each month and stay within the terms of getting it paid off before you get with a 25% interest rate, you can manage it quite well.
Yeah I hear you on that too. I put about 6K in appliances on a 0% one year card, that’s paid off without interest. The TV was half put on a sears card @ 0% that’s paid off. Some of the furniture in the house was on an account with them at 0% and paid off too. The improvements to the house $50K worth in materials was done under the mortgage, which even with that I pay less than most do for rent because we got an awesome deal all said and done.
Those things above all helped my credit score out a lot, but also work against me a bit because its avail. Credit open in my name. and closing them would not be good for my credit since it isn’t long standing.
yup. im selling all that junk anyway. rolling chassis needs to find a new home, as does the 02m, my engine mounts, ecu, coilovers and other various parts. time for bigger and better things
Not knowing everything about your situation, I’d gamble that you’re better off not consolidating. A lot of the consolidation stuff preys on people who are too dumb or too disorganized to manage or understand their debt. The consolidation company has to make money and its going to come from you.
With some simple financial calculator functions you can determine what the best amount to pay off each card is each month. If that’s not in the cards, just pay the biggest chunk of your $ each month to the highest rate debt (prob CCs).
I’d hold off on major home improvements like the garage. Just because you’re putting the money into the house (garage, whatever) and not blowing it all on hookers and gambling, doesnt mean its a great use of funds. Pay down that debt as fast as you can and then reevaluate.