ERazzi

Dear SClark,

Why does this have to be an all-or-nothing decision? I would be hesitant about putting the whole $17,000 into reducing your line of credit if that would leave you without much cash left over. A line of credit may be the next best thing to cash--but it still aint' cash. The bank could shut down your line if it decides you've become a credit risk. It doesn't usually happen--but it could. Keep that in mind. Also, you can count on that interest rate rising. It might not happen until next year, but the prime rate will eventually head back up (as will the rate on your money market account).

On the other hand, I'd avoid those interest-only payments. They do nothing to bring you closer to debt-free day. You might consider taking SOME of the cash from your money market account and using it to pay down your line of credit--but only to a level that makes it affordable for you to make monthly payments high enough to shrink that remaining balance in a methodical way.

You say stock/mutual fund investments are not an option right now, but I'd encourage you to look into saving via a 401-k account at work, or with a ROTH IRA. Even if you can only chip in a small amount each month, it will add up--and put you in a position to benefit when the stock market eventually recovers. Don't know when that will be, of course, but the day will come!

Good luck
--Elizabeth Razzi at Kiplinger's