The Hidden Cost Of Credit Card Debt Consolidation Revealed
If you have half decent credit then you get junk mail every day that tries to get you to consider consolidating credit card debt with various financial institutions and some of them seem like very familiar names. You will see names like GE Capital and other familiar names but remember that just because they use the name of a big familiar company does not mean they are still part of that company.
Companies may be able to use the known of a well known financial institution if they once were one in the same buy have since split off to become their own company. These companies are not necessarily lying; they can indeed help you get your debt and other financial matters into order. Credit card debt consolidation, however, may wind up causing your credit score more damage than you originally bargained for.
Remember the old adage, “If it’s too good to be true, it probably is.” Keep this in mind when credit card debt consolidation companies try to make the process seem so easy and helpful.
Advertisements often include check-like documents that claim to just give you a relatively large amount of money that you can invest in your debt elimination plan. That sounds great, but that large amount of money comes from an equity line of credit that the company offers you as long as you are willing to put your home up as collateral. Using such equity credit lines in an effort to consolidate credit card debt is not wise.
Credit card debt consolidation advertisements should get sent straight to the garbage can. They turn credit card debt, a relatively short term debt, into a long term problem by using an equity line of credit to attach it to your home mortgage. In reality, credit lines of this nature should only be used to pay for larger expenses, like remodeling your home or paying for your children to attend college.
What About Refinancing
You can also consolidate your credit card debt by refinancing if you are a homeowner. This is not the best option either, but it certainly can work if you find yourself in a financial bind. Refinancing your home means extending your mortgage back out to thirty years, but this time for a smaller amount. Your loan would be for the amount you still have yet to pay on your mortgage plus the amount of money you need to consolidate your credit card debt.
When it is over your mortgage payments are probably lower and your credit cards are paid off but now you have a mortgage for 30 years again. Some people don’t mind that and it is not a bad idea.
Filed under: Business