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Credit card debt
I am wondering if I should try and refinance my home in order to pay off credit card debt or try just paying the debt down each month? Would a bank even do this? I am paying on average over 20% interest rate on these cards so the interest is really hitting hard. What is a good option for me and my credit?


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Snowball it, stop using cards

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Although the golden rule to get the debt off is "pay", its easier said than done with the interest rates haunting you. Unless you tackle the debt with a planned strategy, this will not be possible. Here is what I would do:

1. STOP USING YOUR CARDS ALTOGETHER. Without this, nothing will work.

2. ATTACK ONE DEBT AT A TIME: Focus one ONE debt at a time. Pay minimum payments on everything else. Don't worry about interest rates. Now which debt you should go after first? It's the LOWEST BALANCE Debt (No matter how low the balance is).

3. KICK OFF BALANCES ONE BY ONE: Say you paid the first one off, then use all that money to pay your next lowest balance. Keep doing it till you knock off everything your way. As you go, the money applied to each payment grows, hence it's called 'the snowball'.

4. GET HELP ONLINE: There are many sites that calculate how this works, and many of those even plan your snowballing method. Use them, see for yourself how that can work, then decide yourself the best way for you.

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Refi to reduce debt?

Isn't that the reason why so many people got underwater on mortgages?

If you refi you have to pay refi fees, which can be up to 3-5k.  If your debt load is good and you have a lot of equity in your home, then you could get a HELOC from a local credit union.

I would recommend joining a credit union and after you have joined ask for a debt consolidation loan.  You would pay the loan off in 12 to 36 months and build a relationship with a credit union.

In the interim, pay down your lowest balance card first.  Once that is paid, then move to your next lowest balance card.  Don't use your cards during this time.

For example a credit card balance of 10k at 20% interest is costing you 5.50 or more in interest a day.  Figure you how much you can pay and make multiple payments a month if you ahve it.  If you are lucky the paid off card will give you a 0% or a low interest transfer after being 0 balance for 3-8 months, then you can balance transfer the amount from your next higher card to that card and start again.

Your goal should be to have only 1 card showing a balance of between 1 and 10% for the highest fico and the lowest utilization, all the rest are 0.

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