Paying off debt with options

[artmutt]

New to the forums so hi to all. Here is my situation. I have close to 10,000 in credit card debt. My rates vary. Some are at 2.9 for a year and others are around 11%. Should I continue to juggle the balance transfer rates to obtain good apr's? My other option is to get a equity line of credit that I can borrow from. I think it is about 4.5% for the equity line. My other option is to take from my mutual funds, (currently worth about 100,000) My reservation about the mutual funds is getting hit from uncle sam. If I do go that route then I would like to put it back over time. So instead of making the cc payments, making the equal amount back to the mutual fund. Thanks in advance. By the way most of my other debt is in mortgages, so the credit card debt is the only thing I'm concerned about at this time. It gets to be a little pain in the butt having to make seven credit card payments a month.

[creditcardfree]

Welcome! I would advise against borrowing from mutual funds especially if they are retirement accounts.

Have you heard of the snowball method of paying back debt? Make the minimum payments on 6 of the cards, and pay the minimum plus any extra you can towards the the 7th until it is paid off. When you get to the next card, pay it's minimum, plus the minimum that you paid on the previous debt and any extra. Keep doing this until all cards are paid off. You can start with the lowest balance card or the one with the highest interest rate.

It worked for me.

[disneysteve]

I wouldn't cash out of investments to pay off debt.

The home equity option could be the way to go IF AND ONLY IF you now have your spending totally under control and are living well below your means. If you are still buying things you don't need and can't afford, taking the home equity loan should not be done as you will likely find yourself right back in debt, worse than you are now.

I'd like to see you post your income and expense info and let the pros here pick apart your budget and show you where you can free up money to get rid of this debt faster.

In the meantime, make sure you are paying just the minimum on the 6 cards with the lowest rates and putting all extra money toward the card with the highest rate. Once that is paid off, move on to the one with the next highest rate, and so on.

[jIM_Ohio]

Of the 100k in a mutual fund, is $10,000 of the money at a loss? Is this a retirement account?

I would NOT sell or not sell based on a tax reason to pay down the debt...

I would pay down the debt with the MF if the money has no withdraw penalty and the money would be replaced quickly.

What are your monthly CC payments? What would the schedule be to repay the $10k to the mutual fund(s)?

**edit**
for example if you paid $1000/month back to mutual fund, this makes sense (you would have money replaced within a year at market lows.

if you paid back $1000/year to mutual fund I would not sell the investment and instead look to reduce budget and pay the cc's off another way.

$400/month to mutual fund is where I draw the line- if you send $400 or more every month to mutual fund, you have paid back most of the money in 2 years.
If you send less than $400, I would argue you really need to rework the budget before looking for quick fix choices to pay down the debt.

[artmutt]

Thanks for the replies. I think that the snowball approach will be my best bet. I've got 800.00 per month to dedicate to credit cards. It shouldn't take too long at that rate. I would give you all my financial info, but that would take a long time as I own my own business. We do have the spending under control now. We cut up all the cards except two about two years ago. Don't want to go back to where I was before. Thanks again

[jIM_Ohio]

In this economy, I'd liquidate the $10,000 from the mutual fund then pay it back with $800/mo.

Assuming no penalites from a sale of the MF.

In 13 months you will have replaced the $10k.
If the market tanks, you made a great move
If you lose your job, you have reduced your expense footprint by $800/mo
You still have 90% of your money invested
You can write off any tax loss on your 2009 tax return

If you have 10k of shares which are at a loss, sell those shares (tell your broker to sell that specific share lot).