Trading One Debt For Another

Sandy wants to employ her equity credit line to get her out of credit card debt, but Dave tells her why it's not necessary.

QUESTION: Sandy and her husband have 2 credit cards with balances of $1,200 and $4,400. They have an equity credit line that has a lower interest rate than either card. Should they use the line to pay off the debt? Dave explains why they shouldn’t even think about it.

ANSWER: The interest rates are high on the $1,200, but it’s really not that much; about $180 in interest. You’re going to save $300 a year by doing this, and you’re not going to keep the debt. I don’t want you to pledge your house for an unsecured debt to save just a little interest. Get in attack mode and knock it out.

Personal finance is more about behavior than numbers. Just get mad at the debt and kick it in the teeth instead of using your home equity line of credit.