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Updated over 6 years ago,

User Stats

30
Posts
9
Votes
Khadijah Celestine
  • Baltimore City, MD
9
Votes |
30
Posts

Should I keep applying for a heloc until I get one?

Khadijah Celestine
  • Baltimore City, MD
Posted

I have bad credit. I currently pay $1500 a month in total debt and have finally reached a stable enough place where I can put an extra $900 towards my debt. I have $18,000 in high interest debt that I would like to get rid of ASAP. The other debts are my car loan and student loan which together are $800 and I have no problems paying those off slowly. I also own a Baltimore row house free and clear. 

I had a hard money lender come and view the house. All fixed up, he'd loan $25,000 on it for 5 years @ 18% interest. ($635 a month). I applied for a heloc at a local bank. Because of my income and DTI, I was conditionally approved for $25,000. I was later denied because of my low credit score. My only joint applicant does not have the required 700 credit score needed from the bank. They require a 700 credit score since this is an investment property and not my primary residence.

My goals are to get the heloc, finish renovations on the baltimore house (about $6,000 but I'm budgeting $10,000), and then use the rest to reduce the high interest debt until I can pay it off.

$25,000 heloc

-$10,000 renovations

-$15,000 high interest debt

I'll have $3,000 in high interest debt left and a renovated rental I can rent out.

Assuming I break even on the rental and it covers the loan and the maintenance, this lowers my monthly debt payments to $800. I'll be able to pay the extra $3,000 in two months and will be BAD-DEBT-FREE!! I can then use the other $1600 to pay off the heloc, pay off my car loan save for a house, not sure what I want to do yet.

My questions

1. I'm wondering if it's ok to apply to bank after bank after bank until someone will give me the heloc. 

2. If I do get the loan, what should I do with the extra $$$, I'm thinking save for a two-family primary residence so I can rent the nicer side out but I'd be curious to hear other suggestions.

If I don't get the loan, it'll take me a year to get rid of the high interest, but that will be another year the baltimore house is sitting empty. 

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