Home Equity/Debt Consolidation

[Sick&Tired]

We don't qualify for Chapt 7 right now so we're trying to get a home equity loan for about $18,000-that will pay off all of our debt besides our home and our $287 car payment. We would have no problem making the payment on this loan if approved. If we get this we can avoid BK altogether and I will finally be able to breathe. This would solve all our problems. However, our credit (mine and husband's) is pretty crappy as you can imagine. We proabably have about $20,000 in equity in our house right now. We just filled out an online application with Lending Tree (waiting to hear back). My question is, how hard is it to get approved for one of these loans if you have horrible credit. It seems to me that that's the time someone NEEDS to be approved, but dreading bad news. Anyone have experience. **Crossing my fingers**

[nc73]

Zero chance unless you want a high interest rate. Also with the current housing market I wouldn't touch a HELOC loan. It is never a good idea especially in our current market. You will just end up losing your home, eventually. You could possibly sell the house and rent so you can pay off debt. Option 2 would be to file bk. Option 3 CCS.

[keepmine]

I'd suggest a 4th option. You can't borrow your way out of debt.
Were I in your shoes, I'd find a pt job and dedicate the earnings to debt reduction. Noway I'd borrow against my home.

[BassBoy]

I agree with keepmine. We did this a few years ago and it didn't solve any problems. It only prolonged the inevitable. It is never wise to turn unsecured debt into secured debt.

[Hillbilly]

Sick&Tired, just like BassBoy above, (and as countless thousands of others have) We used our homes "equity" to secure a HELOC loan a few years ago and payed off all of our debts other than our mortgage and car.
Although we never again ran up our credit-cards, or took on other debts, changes in our income and circumstances brought us to the point where we could no longer afford the onerous combination of the mortgage plus HELOC payments, over the course of a couple of years we totally depleted 30 years of savings in an ultimately futile attempt to keep up the monthly payments.
Before we ever got behind on, or had even ever been late with a payment, we pleaded with our mortgage holder for a refinancing that would get us back into a single payment that we could manage.....No dice, forget it, No way.
Then because our "equity" was already encumbered, and we had depleted our savings, and we couldn't even afford our present payments, there was nothing left for even the most predatory of lenders to go after.
We lost our home of 31 years to foreclosure.
We now live in another state, but the "bad-debt" vultures are still circling, waiting and watching to pick our bones clean. Although we no longer own the house, they are still calling and trying to collect on that HELOC that was supposedly "secured" by our homes equity.
Well guess what? there was no "equity" left for them to grab (and there usually isn't) so they will come after anything that they can get their beaks and claws into for as long as they can.
Because we have essentially no assets left, are old, disabled, retired, and living on pension, and thus are virtually "judgment proof", they have not (yet) pressed their collection efforts in court, and we haven't needed to file BK -yet-.
But we do have another home now, which if we ever manage to accumulate any signifcant equity in, or improve on it, it is likely that they they will be coming after it.

[Cassiopeia]

Several years ago, when I was beginning to get in DEEP debt, I got a HELOC. HUGE HUGE HUGE mistake. If I had it to do over again, I would have filed BK at the time, or at least gone with a DMP with CCCS.

IF you get a HELOC, the trick is (like with BK) to NEVER get in the same circumstances again. Sadly, I just continued to rack up debt and eventually had to file BK. Ending up with all the unsecured debt as well as the HELOC.

I reaffirmed my HELOC in BK. I'm so happy to have all OTHER debts discharged ($25,000+), but I often think how much better it would have been without the HELOC.

I would never recommend a HELOC for anyone unless they have a lot of self control.

[Sick&Tired]

thanks

Thanks for all the advice-I'd say you've all changed my mind drastically. Looks like we may try for the Chapt 13, and then hopefully be able to convert in the near future. Thanks again!

[HHM]

You can't borrow your way out of debt.

That is probably one of the best pieces of advice on this forum