Q: I have been paying a $20,000 home loan for 25 years at 10 percent interest. To lower the interest on the $5,000 remaining balance, should I take out a home equity line of credit at a credit union for 4 percent interest, or a home equity loan at 5 percent with no fees, or should I charge it to my credit card (which has an interest rate of 5 percent)?

Or, should I leave the loan the way it is? I guess I should have asked you this question 25 years ago.

A: If it makes you feel any better, I have only been writing this column for 11 years, so I couldn’t have helped out 25 years ago.

I hate to see anyone pay more interest than they have to. You’d be a lot better off getting a home equity line of credit at 4 percent and paying off this balance as quickly as possible.

Here’s how the numbers shake out:

Your current payments are about $175 per month, with $68 still going toward interest. If you pay off the loan with a $5,000 home equity line of credit at 4 percent, with a 5-year payoff, your payments will drop to $92 per month. That’s still a significant savings of $80 per month.

If you continue to pay $175, you’ll pay off your loan in 2 years.

I think you should do this as soon as possible, so you can start saving more money.

March 12, 2004.