Consolidating Credit Card Debt
Those of us that have reasonably good levels of credit are subjected to what seems like a daily parade of junk mail through our mailbox, inciting us to consolidate our credit card debt with companies that have familiar sounding names. These include names such as “GE Capital”. Be wary of these, though; just because they have the name of a large company that everyone knows does not necessarily mean that they are part of that company. In fact, they may well have broken away from the company many years prior and are now an independent organization. They may be quite legitimate and able to assist you with your credit consolidation, but you should still take care not to put yourself further into debt if you choose to consolidate all of your debts. Many companies such as these make it sound very easy to consolidate your debt and this is the danger.
A good thing to remember is that, if it sounds “too good to be true”, it most likely is. Be wary of documents made to look like checks in your name for ridiculously large amounts of money. It looks tempting and the answer to all your worries, but all it amounts to is an offer to consolidate your debt, which will use the equity you have in your home as collateral for a “line of credit”. These forms of debt consolidation should be avoided.
Lines of credit are suitable for any major spending such as college education for your children or to renovate your home. They are not suitable for credit card debt consolidation because they are tied to your mortgage and no one wants to have their short term debt become a long term problem. The advice - throw these letters in the garbage!
What About Refinancing?
If you own your home, refinancing can be an option in consolidating credit card debt, in addition to balance transfer options. Whilst it may be considered extreme as it will add years to your mortgage repayments, if you are flexible enough to cope with a 30 year mortgage, you should consider it. Because the amount that you are refinancing is a great deal lower than the original mortgage, there is scope to add the amount you require to consolidate the debt. The only problem is that when you have repaid the credit cards and the mortgage payments are again reduced, you will still have a 30 year mortgage.
The bottom line is that you should act in a way that will benefit you in the long run, taking care and obtaining advice along the way to avoid having lower credit score. Play things smart and you will get yourself out of debt and might as well increase your credit score.
