advice please!
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| Fri, 12-10-2004 - 11:42am |
Hi everyone,
I mostly lurk here, but you've all given me great ideas and support in the past so I thought I'd run my current dilemma by you! We bought an old house 5 years ago, and have been gradually fixing it up. So far, most of the work has been cosmetic, so we've been able to do it at our leisure, as we could afford it. Well now we need to replace the roof. My dh has patched it enough to get through winter (we hope) but it will definitely need to be done in the spring as it's really doubtful it will make it through another winter. We live in NH and get a LOT of snow and ice!
The question is, how to pay for it? I know ideally we would've had a savings for just such a reason, but we've been focusing on debt repayment and have just recently started saving as well. My dh will be getting a raise starting in January that puts us in a position to get the rest of our cc debt (around 14K) paid off in 12 months. VERY excited about this! If we DON'T snowball so aggressively to ccs, and go back down to minimums, we could probably come up with the cash for the roof. But would that be the right choice? We'd be paying cash for the roof, but really prolonging our payment of these high-interest rate cards. Another option would be to keep up with our cc repayment, and finance the roof. We could find a loan with a low interest rate and no prepayment penalty, and pay it off as soon as the cc's are gone. But that doesn't really feel right either, as we are trying to get OUT of debt, not add more to it. Help?


Kiki
I would start setting the money aside is savings, even though it means prolonging debt repayment. Personally, I think this is better than financing the roof for several reasons, one of which is purely psychological--if I were almost out of debt, made that last payment, and then had to turn around and open a new credit account, I think I would shoot myself LOL. On the other hand, extending the repayment plan by a few months doesn't seem as daunting.
Other points to consider are that if you use an equity line, you are putting your house up against debt. Yes, you get a lower interest rate, but if you ever fall behind again (heaven forbid, but things happen), your house is on the line for it.
Also, by saving for the goal instead of simply charging it, even though the net effect financially is similar, it gets you in a good habit for when you're debt free. Why not start the savings habit now?
Ultimately, the decision is up to you, and I think the net effect financially is going to be roughly the same either way. So you have to decide which feels right to you, and which one seems to make sense for you.
Good luck and congratulations on nearing the light at the end of the tunnel! Blessings,
Heather