General

Sorry to hear about your position, that's got to be hard. Ideally, you avoid getting into more debt by pushing off these larger purchases as much as possible and figure out alternatives until your income affords it. This may make life a bit more complicated for a while, but it could ensure that you're not in a terrible financial spot later on.

That being said sometimes debt is necessary. A HELOC (home equity line of credit) might be a good option as long as your current loan to value is below 70% and you have the income to cover both your existing mortgage and the payments back on the HELOC. But be aware that you're basically putting up your home as collateral and could end up losing it if you find yourself in a really bad situation for too long.

Another option is borrowing against your 401k. The risk here is that if you're unable to pay it back before the markets start doing well again, you could miss out on some good growth opportunities. You could also end up getting charged some fees & taxes if it goes unpaid.

Another option is taking a secured personal loan out against your car, depending on it's current value. Typically these interest rates are much lower than credit cards, but not as low as HELOC or 401k borrowing.

I am not an expert by any means. I'm sure others will have their recommendations. At a minimum, be sure to make a budget based upon your predicted income for the next 3 months and align your spending habits to ensure you're not going deeper into debt.

We just did something like this...we reassessed our house and we took out a $40k home equity loan to pay off all our debts.. We are saving at least $500/month between payment on all bills vs. our home equity payment. We hope to pay off the HELOC in 3 years, and banking the difference each month.
FYI: The federal rates just went up again, so a lot of stuff is getting more expensive..

If you have the discipline to not run your credit card up again, a home equity might be a valid choice.
The interest rate would almost certainly be way lower than a credit card.

The problem of course is a lot of people pay off the CC then run up a balance again. Then you have the CC and the HELOC to deal with.

You might want to consider trying to find a CC with a reasonably low balance transfer rate before putting your home on the line.

401k loan is not a bad option if you're trying to limit paying interest. "interest" on your 401k will be paid back to yourself / your 401K and not a bank. I just took out a 401k loan for a real estate investment at 7.5% "interest" over 5 years.

Like @SwiftJAB mentioned, the trade-off is you would have less money working for you in your 401k if the market magically rebounds since you're using it to payoff debts.

can't you take the interest on your HELOC off on your taxes?

Thank you all...just to let you know, I'm not worried about putting the debt back on the credit cards. The main problem was that my wife does all the finances and (to be clear: this is a ME problem, not her): I didn't know that the money situation was getting tighter until we were already in some debt on the cards. We've cut back a LOT but it's just hard when gas, food and everything is going up AND you are trying to put a dent in the existing balance. I've never been in this situation before, so I knew I could count on you guys for some ideas to explore. Keep em coming!

Sun...if you don't mind me asking: what is the monthly amount on your 401k loan?

rayzor6 wrote:

I took out a $50K loan (the max limit), so it's about $362 per paycheck (bi-weekly) as a post-tax deduction. So ~$724 every 4 weeks.

I once took out a loan from my 401k to pay off a high interest credit card. You're pretty much paying it back to yourself. I think my interest rate for the loan was 3.4%. I would highly suggest going that route if possible.

shadyfozzie wrote:

Only if you are using it for home improvements iirc.