Everybody's Uncle

I have a lot of credit debt (about $20,000) and have thought of going to a debt consolidator for assistance in getting rid of it, or at least bringing it to more manageable levels. I do manage to keep on time and am not late with anything, but I am deeply concerned, especially because of today's economy.

My son has discouraged this because it will leave negative reference on my credit record, (it's been good except for the amount of debt against annual income) in case I wish to purchase a house in the next two years or so to replace the one I own now (too big for me). What do you think?

(Unsigned)
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Dear Unsigned,

Sorry you are carrying excessive debt. Debt consolidation may not require an agency nor have negative impact on your credit rating. If you get solicitations for credit cards with low "teaser" rates, switch to those cards and track them closely. A switch from 2% to 15% can be shell shock.

Contact all credit card companies that hold your debt. Tell each that you want to consolidate your debt, need a $20,000 credit line and want a lower interest rate. If your track record is good so are your chances.

I don't recommend using an equity line because I have a fundamental resistance to collateralizing credit card debt. However, the mechanism is available.

Creating an equity line on your house, if you don't have one already, is relatively easy and usually involves no costs. Contact your local banks and do some comparison shopping. Online equity lenders are available as well. The mechanism can both lower the interest rate and monthly payment but often encourages more credit card debt.

If you are anticipating selling your present home and moving into something smaller the potential for some profit exists. I strongly recommend using such profit to pay off all existing debt. Carrying $20 ,000 of debt on a credit card at 10% costs $2000 per year, $3,000 at 15%. There are much better things to do with thousands of dollars per year.

Good luck,
Everybody's Uncle