Mac & Ivy lose control of cash flow with a single unexpected expense.
Mac & Ivy (not their real names) both work full time, have 2 kids, and own their own home. They have a great interest rate on their first mortgage, Life is good, but the monthly budget is strained. When faced with a large, unexpected expense of $12,000 they put it on a credit card (at 27% interest), resulting in a $400 / month minimum payment on a balance that never seemed to go down.
With their budget strained by the $400 payment, the temptation was to use the credit cards to cover monthly shortfalls, which were now happening more regularly.
The average US household credit card debt is $12,000 (Nerdwallet 1/8/2024). But amounts of $30,000 or higher are not uncommon.
When we spoke….
Mac and Ivy’s credit card debt was up to $20,000 with a monthly minimum payment of $800.
They had gone to their local bank for a HELOC, but because 3 cards were maxed out, their credit score had dipped below 720, so the bank turned them down.
They filled out our on-line loan application for our “FAST” digital HELOC, and submitted their documentation the same day by uploading documents through the secure portal (they were provided a list that included: pay stubs, mortgage statement, etc.).
The result: cash flow improvement of $617 / month ….
The next day they had an approval for a $40,000 HELOC at 11.1%, and we closed a few days later. Mac and Ivy used $20,000 of it to pay off the credit cards. Their new minimum monthly interest only payment was now $183, improving their monthly cash flow by $617.
In a few months, Mac will get a raise, and he will use half of the raise to improve monthly cash flow, and the other half to start paying down the HELOC balance.
Not everyone who applies for a HELOC will be approved. Your approval and terms will be dependent on credit, income, loan to value, etc.
