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Situation |
Solution |
| A home equity line of credit was obtained four years ago
to consolidate debt from higher-rate credit cards. Now, the credit cards again
have balances on them. |
As much as possible, move the new credit card balances to the
home equity line of credit. The shift can reduce the interest rate and convert
regular interest into tax-deductible interest. |
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| The lender is charging a $100 annual fee and an
additional $50 annual inactivity fee on a home equity line of credit, which has
no balance on it. There are no savings in the bank. |
Don't worry about the $150 in fees each year. They are a small
price to pay for having a ready source of money should a job loss or other
financial crisis arise. |
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| There are plenty of savings in the bank and you are being
charged $150 a year for keeping an open -- but empty -- credit line on the
books. The credit line was opened a year ago, and $800 in closing costs were
waived on the condition that the account remain open for three
years. |
Wait two years, then close the home equity line if it remains
unneeded. The $300 that will be spent on fees is less than the $800 that would
be lost in closing costs that would kick back in. |
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