Three Reasons Why You Should Not Refinance Your Home To Pay Off Credit Card Debt
- Using your home as an ATM to pay off your credit card debt could be a huge mistake. When you take the equity out of your home to repay credit card debt, you are in effect turning an unsecured loan (credit card debt) into a secured loan (home equity loan). Remember, a debt collector pursuing you for payment of credit card debt cannot attach your assets without a filing a lawsuit against you and winning a judgment. Please don’t make it easy for them by jeopardizing your home to pay credit card debt that could be discharged in bankruptcy.
- When you take the equity out of your home to repay credit card debt you are creating a new bill that may make it difficult for you to keep your home out of foreclosure. If you are struggling to repay credit card debt, that is a sign that you are in financial trouble. It may not be as bad as it could be, but it is probably not as bad as it is going to get if you don’t take effective action to solve your debt problems. If, and more likely when your financial troubles worsen, you may be one step away from foreclosure because you took out an equity loan when you probably should have considered bankruptcy.
- When you take out a home equity loan to repay credit card debt, you could end up paying more over time. Since home equity loans are typically 15 to 30 years, you will pay back more total interest over the life of the loan. Why pay on a credit card for 30 years if you don’t have to? Remember, bankruptcy will discharge credit card debt and give you an opportunity at a fresh financial start without jeopardizing your home.