General question for the board: I am about to close a refi (hopefully) that will include a substantial HELOC. I was also just offered a 0% BT w/ATT Universal. My plan is to use the HELOC to pay down approx $25K in CC debt at 23%. Then I thought I would use the ATT BT to pay down the HELOC for a year, and carry the debt at 0%, rather than the 7% in the LOC. Thoughts? I have to pay down the debt first to get my scores up, to get the ATT card approved, which is why the middle step.
23% on a HELOC? Did I read that right? Seems risky to me...I assume you exhausted your other HELOC options?
We did something similar when we got our HELOC. One interesting thing was that our scores went up dramatically when our balances went into the HELOC instead of sitting on the CCs. (Even the month when the HELOC showed about 75% utilization.) As a matter of fact, we also use the HELOC frequently as a place to balance transfer INTO in order to take full advantage of the 0% BT offers that come along. Personally, I think your plan is a logical one based on what your goal is. 0% is better than 7% and 7% is a heck of a lot better than 23%. DemPooches
The reason it shows better on credit reports to use HELOC is because it is SECURED by your residence. This gives lenders comfort that you haven't really overextended yourself, but borrowing against your own assetts. Don't forget the TAX DEDUCTION! Most people qualify to have the interest tax deductible. So if you HAVE TO use your HELOC, for every $1 in interest, you'd get back about $.32 at most. I'd double check about that 23%. Why so high? Most banks lend on the prime rate which is 4.75 + margin. At wells fargo in california, it's 4.75 + .85 for 5.60% at 80% loans to value of your property. Shop around. It looks pretty screwy to me. But if it's still your best option, it's still tax deductible!
I may be wrong here, but I think the HELOC is what is at 7%. At least that is the way I read the post. DemPooches
DemPooches, I think you're right--the wording was ambiguous, but your read makes more sense. In that case, I say go for it! I use one of my HELOCs as a holding account all the time.
