A 30-year loan has a payment on $10,000 of about $60 a month; a 15-year fixed loan has a payment of about $83 a month. The non-deductible interest on the credit card example above is $193. That is three times the payment (not interest) on a 30-year fixed loan, and over double the payment of the 15-year loan. In the home loan examples of 30 and 15 years, the interest is deductible. By the way, the interest portion on the 30 and 15-year loans is about $50 in each case, as the interest rates are only about 1/4% apart.
My solution to those who are in too deep is simple: Go to your father and see if he will help you. If you choose not to do that, and you own a house, you really need to refinance and include all of your credit card debt. With gas prices going through the roof, no one can afford the luxury of paying ludicrous interest on their debts.
You’re not through, though. The last part of the solution is building reserves through monthly savings now that you aren't giving your money away or by pulling the money out of the house when you refinance. (See my column 7/18) This will enable you to develop a new pattern, paying cash.
I will leave you with a good feeling that shouldn't be misconstrued. The two largest credit card debts I have ever dealt with were $600,000 and about $350,000. One was a consultant to my industry and the other a banker for a major worldwide bank.
One refinanced and paid the debt off, the other didn't. I really don't feel bad about that one!
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom. Roger is the President and founder of Manhattan West Mortgage.