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WITI PERSONAL GROWTH
The Hidden Danger Of Refinancing To Pay Credit Cards
The Hidden Danger is the very real possibility of recreating the same or greater credit card debt. Stop and think about how you first ran up charges on your credit card that you did not pay in full each month. Was it because you needed to make ends meet due to a financial setback such as losing a job? Were there unexpected expenses due to an emergency that you hadn't planned? Did someone in you family lose control and overspend? People run up credit card balances for any number of reasons. But most likely it is not because they enjoy paying high interest or being in debt. Whatever the original reasons, simply using equity to pay them in full without changing your buying habits will just lead to more of the same. Besides the obvious fact that you are securing (with your home) an unsecured debt, what happens when you have zero balances on your cards? You become a great credit risk. The bank will most likely raise you line of credit to a higher maximum. And other banks will send you offers for new cards as well. The cycle starts all over again unless and until you make a decision to become a conscious consumer and change your spending habits and/or increase your income. If you pay off credit cards with a home equity loan, immediately put your credit cards in the freezer or some other place that will force you to think before you purchase. It may be best to simply put them away for a minimum of six months or even better cut them up forever.
What is your point of view? Please post your thoughts on the discussion board.
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Turn on the radio or TV and you will hear several times each day, "Refinance now! Low interest rates! Pay off high interest rate credit cards!" Sounds good, doesn't it? Who doesn't want to lower their home mortgage interest rate and be able to eliminate those nasty high interest monthly credit card payments? It seems like a great deal! But there is a very real hidden danger to this plan.