Exchanging one form of debt for another is a fatal financial decision. You cannot borrow your way out of debt, period.
I just heard another commercial from an area mortgage lender encouraging home owners to refinance their homes and take out equity to payoff credit card debt. Sounds like a great idea right? Get rid of credit card debt? No brainer. Not so fast. First, you better be sure risking your home for a Visa card bill is for the right reasons.
If you have a large amount of credit card debt, you need to sit down and examine your total financial picture. I refer to this as a financial checkup. Ask yourself the following questions:
- How much consumer debt do I have?
- Car payments?
- Student Loans?
- Credit Cards?
- Medical bills?
Are you paying the minimum payments on your debts? Are you behind on any bills? Are you struggling each month to make ends meet on your basic living expenses? If you answer yes to any of these questions you need to stop and think about borrowing money from your home.
Exchanging one form of debt for another is a fatal financial decision. You cannot borrow your way out of debt, period. For most people, a home is their single most valuable asset. Unless you can alter your spending habits and raise your income, risking your home equity to pay off credit card bills is a bad financial decision. Time after time I have had clients meet with me because their home was in foreclosure and the reason for the foreclosure was a past due home equity loan.
If you have credit card debts, medical bills and other financial burdens and find yourself struggling to make payments, seek the advice of a bankruptcy professional who can give you a financial checkup. Don’t make fatal financial decisions without getting input from an expert.