Are you reading the same thread I am? The OP lost some work. Despite that, (s)he was able to keep the debt to a meager $5,000. Where on Earth are you getting this “spree” notion?
I agree that mid-600s is NOT a very good score. 740+ is considered being in “prime” territory. It might well be good enough to get a different loan with a better rate than 22%, however.
For everyone who says “overspending is the problem”, remember that per what the OP said, the charges were incurred back when s/he had a dry spell (reduced income) at work. So, your comments may be a bit harsh and misplaced.
That said, I’d be careful about using the house or the car as collateral for such a loan. Be especially careful with the car, as there are a lot of “title loans” places that are real scams.
Maybe a bit harsh, but I disagree with misplaced. S/He’s got a house with some equity in it, a car worth well over $5,000, and some student loans, yet a dry spell at work resulted in missed credit card payments. That person is living in a financial house of cards. If you don’t have 6 months living expenses in liquid savings you’ve got no business buying a house.
Borrowing to get out of debt is like drinking your way out of alcoholism.
Whoever it is needs to quit spending and start saving, and when I say quit spending, I mean it. Don’t just trade the $5.00 latte for a $1.00 McCafe, make coffee at home for $0.25 and use the difference to pay down debt. Cut off the cable and smartphone. Keep track of every expenditure. Most people will be shocked at how much they simply fritter away over the course of a year.
Of course, if everyone did this the economy would collapse. It’s dependant on people buying shit they don’t need with money they don’t have, but that’s all right, it’s the reverse of the tragedy of the commons. There are more than enough suckers out there to keep the ball rolling, and you can get out of the game.
In my opinion it’s not a good idea to use home equity for anything except things that improve or repair the home, or emergencies.
I think you’re making some assumptions that we don’t know about in the OP. The recent economic problems surprised a lot of people, even those with decent emergency savings. Some people have been out of work for much longer than six months, and there is a time and a place for borrowing money.
All that said, though, you’re right if we apply this to the generic everyman. Many of the people blaming their financial troubles on the recession were not practicing good money management from the beginning.
That’s true, the OP may be prone to understatement and a dry spell at work may not have meant two or three months of no commissions but rather six months of unemployment. I withdraw my opprobrium.
Even if the alternative is paying 22% interest? I find that baffling.
I’d rather pay 22% interest than risk losing my house over a small loan. Although frankly both sound terrible, and I choose Door Number Three. 
Risk losing your home over $5,000? If I couldn’t afford to pay the interest on a $5k loan at 5%, then that is a seriously bad predicament. Especially since you still presumably have the option of doing a taking a cash advance back to a high interest, unsecured, credit card.
To put this all in pure dollars and cents, if you pay off $5,000…
In one year, at 22%, it’ll cost $467.97 per month for a total of $5615.65
In one year at 5%, it’ll cost $428.04 per month, for a total of $5136.48
Savings if using a HELOC v a high-interest credit card = $479.16
In 2 years at 22% - $259.39 per month or $6225.36
In 2 years at 5% - $219.36 per month or $5264.64
Savings if using a HELOC v a high-interest credit card = $960.72
In 3 years at 22% - $190.95 per month or $6874.20
In 3 years at 5% - $148.85 per month or $5358.60
Savings if using a HELOC v. a high interest credit card = $1515.6
If you are disciplined enough to take out a HELOC and not use it beyond paying off this credit card debt, then this is the most economic way of doing that. However, as others have said, this does come at some risk because you could lose your home if you default on that loan by not making the minimum payment, which is usually interest. You also need to be disciplined enough not to use it for anything other than paying off this debt.
For a $5000 HELOC loan, the interest (assuming 12 month payback, which is aggressive) would be $20. Less if it’s calculated over 2 or 3 years. If you believe that there is even a snowball’s chance in hell that you won’t be able to swing a minimum of that $20 interest payment anytime in the next 3 years, then don’t put it on a HELOC because it does risk losing your home.
I’d also advise against closing your credit card account. First, you need it to repair your credit rating. (Personally, I’d put just one utility bill on it per month, and pay it off religiously in order to build up my credit score.)
Secondly, if you close the account, you will lose the option of moving what remains of that $5k debt back to the credit card (via a cash advance) should you be unable to make the HELOC payment.
That being said, assuming it’ll take you 2 years to clear the debt, you’d save nearly $1000 by paying it off via the lower-interest HELOC.
At the very least, you should call and ask for a lower interest rate, and shop around for another lower-interest credit card. There are a ton of 12 to 18 month zero interest cards floating around now, if you qualify. That’s an ideal solution if you can qualify. It builds your credit and it’s unsecured.
PunditLisa: You forgot to mention the math for another option which many of us find fairly like: that the OP gets this loan–and then quickly runs up another $5,000 in credit card debt and has the same monthly payment option for that credit card as now plus the payments for the loan.
This reminds me of a similar situation a few years ago: a friend came into some money and had the option of either paying off his credit card debt or paying off a bank loan. I made the mistake of advising him to pay off the credit card debt–since it had a substantially higher interest rate. So he did this–and then promptly ran the credit card back up to his limit. While if he had paid off the loan it is very doubtful he would have gone out and gotten another loan.
I think you should look at it again, a balance transfer can take your interest rate down to 0%, which makes a huge difference in that you can pay down pure principal rather than interest. If you need to remember to transfer again just make yourself a calendar reminder in Outlook or Google Calendar or whatever your preferred electronic calendar is.
And of course in the meantime stop using the credit card, use debit or cash.