Archive for March, 2006

Should I Refinance my House, or go to Credit Counseling?

If you have a lot of high interest rate debts, like credit card debt or loans from finance companies, a debt consolidation loan may be an option worth considering.
If you own a house, you could use the equity in your house to get a debt consolidation loan.  The bank or mortgage company lends you money at a low interest rate, since the debt consolidation loan is secured by your house, so it’s low risk, and you use the money to repay your high interest credit cards.
Refinancing your house lowers your interest rate, but it also means that you have “used up” some of the equity in your house.  If you decide to sell your house before the debt consolidation loan is repaid, the amount you get from the sale of your house will be reduced by the amount outstanding on the mortgage.  If the real estate market declines, you get even less for your house.
In addition, if you have a 25 year mortgage, you will be repaying your debt consolidation loan over 25 years.  It will take 25 years before you are out of debt.
Most credit counseling Debt Management Programs last for three or four years, so with credit counseling, you can be out of debt quicker.
If you want to get out of debt quicker, and you can afford the payments, credit counseling is often a better option that refinancing your house through a debt consolidation loan.