Debt consolidation for credit card debt? Is it right for you?
Many times I see consumers refinancing and consolidating large amounts of credit card debt into their new home loan(s). Well this may or may not be a smart idea, it depends on the individual’s situation. First thing to look at is the available equity in the home. You don’t want to be adding in credit card debt to a home loan if you do not have enough equity. In this market your home’s value could dip and you would owe more than its worth. So you want at least 30 – 40% of equity in your home to consider that.
Also if you ‘roll in’ credit cards into a home loan you are now paying those debts off over the life of that new loan (i.e. 30, 15 years). So you are just extending the payment of that amount of debt. You might be better off attempting to pay it down yourself.
Typically you always want the money borrowed against your house to be used for your property, so cash out for home improvements is normal since those improvements will increase the value of the home. Using equity for credit card debt isn’t the best avenue for most consumers.
