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How to Refinance Your Home Equity Loan: Strategies for Success

There are several things you can do if you're saddled with high-interest debt such as credit cards or home equity loans, the end goal of which is to just be free of this kind of debt, since these are some of the primary ways that the big financial institutions make their money. 

--Look it in the Face:  This one sounds strange, but it really does work.  Many people are in their current situations because they simply cannot face the mountain of home equity loan debt covering over the mountain of credit card debt, and so on.  Your financial life will only change when you face your financial fears head-on and commit to a plan that will probably mean being more realistic about your finances.  This might mean (until you're totally out from under the burden of this debt), cutting back on restaurants, no retail therapy, sending your kids to public school, or whatever (for you) is going to make your dollars go farther.  From now on, you will need to commit to a) not adding to your high-interest debt, and b) using whatever money you can save in your budget to overpay your high-interest loans.

--Pay Down as Much As Possible:  No sugar-coating here:  it is difficult to refinance a home equity loan right now, especially if you're underwater with your home equity.  Your best bet for this is to take whatever liquid money you have in the bank (after your two-month emergency fund, of course) and throw it at the balance of that home equity loan. 

--Write it Off:  This is happening less now that the economy has started to turn around, but I do know several people who have gotten their loans restructured or even forgiven based on financial hardship.  This is where the bank agrees to lower the interest rate on your loan or even restructures it so you actually owe less.  Your payments end up being lower (at least for now) and you stay in your home while you get back on your feet financially.  You definitely need an expert for this, though-- don't expect to just call up Bank of America or Chase and ask for the "loan modification department."  One good place to start is eHomeConnect.net-- they are a national network of specialists that can either help you with a short sale (if you're wanting to get out of your home) or they can refer you over to someone who can help you with a loan mod. 

There are several things you can do if you're saddled with high-interest debt such as credit cards or home equity loans, the end goal of which is to just be free of this kind of debt, since these are some of the primary ways that the big financial institutions make their money. 

--Look it in the Face:  This one sounds strange, but it really does work.  Many people are in their current situations because they simply cannot face the mountain of home equity loan debt covering over the mountain of credit card debt, and so on.  Your financial life will only change when you face your financial fears head-on and commit to a plan that will probably mean being more realistic about your finances.  This might mean (until you're totally out from under the burden of this debt), cutting back on restaurants, no retail therapy, sending your kids to public school, or whatever (for you) is going to make your dollars go farther.  From now on, you will need to commit to a) not adding to your high-interest debt, and b) using whatever money you can save in your budget to overpay your high-interest loans.

--Pay Down as Much As Possible:  No sugar-coating here:  it is difficult to refinance a home equity loan right now, especially if you're underwater with your home equity.  Your best bet for this is to take whatever liquid money you have in the bank (after your two-month emergency fund, of course) and throw it at the balance of that home equity loan. 

--Write it Off:  This is happening less now that the economy has started to turn around, but I do know several people who have gotten their loans restructured or even forgiven based on financial hardship.  This is where the bank agrees to lower the interest rate on your loan or even restructures it so you actually owe less.  Your payments end up being lower (at least for now) and you stay in your home while you get back on your feet financially.  You definitely need an expert for this, though-- don't expect to just call up Bank of America or Chase and ask for the "loan modification department."  One good place to start is eHomeConnect.net-- they are a national network of specialists that can either help you with a short sale (if you're wanting to get out of your home) or they can refer you over to someone who can help you with a loan mod. 

Speaking of banks...

Since we covered Bank of America's "Keep the Change" program yesterday, I'm just going to mention this today.  As always, I am not meaning to sound weird or preachy-- just trying to make suggestions of places you might be able to trim the fat. 

With all that said:  I think it is completely, totally insane to pay a fee to use an ATM, and if you're doing this, just stopping this one habit could save you a ton of money.   If you don't have a list of where your bank's ATMs are located and you don't know that you can get cashback for free at the grocery store, I would like you to stop what you're doing, pull up Google, and find a list of ATM locations for your bank. 

This is not going to apply to you if you bank at an institution that pays back all ATM fees (and if you do-- good for you!) or you're not in the habit of getting cash from ATMs regularly, but in case you're one of the few people who are actually doing this, let me just throw this out there as 'food for thought.'

You get $100 from the bank. 
Say you're a BofA customer and you use a Chase or Wells Fargo ATM, which (I hate to say this) is exactly what both of those banks want you to do.  They are counting on you going outside the network, because this is how they make alot of their fees.

Your bank charges you a $2 fee on their end.
The other bank charges you a $2 fee on their end.

Ouch!  Double ouch!  That's 4% of your money!  That.  Is.  Highway.  Robbery!

Of course (of course!) even I have to do this once in awhile, like if I'm in a state that doesn't have my bank, or if there's a real emergency.  If this happens, I get MORE than the required amount, in order to lessen the pain of the fees (because, obviously, $4 is 20% of the $20 you're trying to get out, whereas it's only 4% of a hundred).  Or, I try to find a grocery store where I can buy a back of gum and get a bunch of cash back, because at least then I am benefiting from the fee instead of the bank.