Largedebt,
That's a tough one. Much depends on what you have in your retirement fund. If it has a good deal of money in it--- well over the $50,000 you've borrowed from it--- it would be the contingency plan for dealing with the possible loss of your contract work. You can make withdrawals penalty free at age 59 1/2, so you'll have more flexibility pretty soon.
The most efficient path to eliminating the debt is to take out a home equity line of credit. Interest on these for debt up to $100,000 is tax-deductible, even if it is not used for home improvements. The interest rate on these loans is also lower than the interest rate on first mortgages (currently about 5 percent vs 6.7 percent) and there are no costs for putting the loan on the books. Needless to say, it's also far less than the interest rate on credit cards.
First mortgages often have high expenses. Also, it's not crystal clear whether a first mortgage interest payments would be tax deductable since the debt isn't for the purchase or improvement of a property.
The biggest question here is whether you have the capacity to pay the loan off and how quickly you can do it. If you treated a $100,000 credit line as a 5 year loan you'd need to pay about $1,887.12 a month. Then you would be debt-free by age 62--- a nice goal. But if you can't commit to doing that, you may have a larger problem.
Scott
