You Must Cut Up Your Old Credit Cards

Category: Finance, Credit.

If you have thousands of dollars of credit card debt, you might be considering taking out a second mortgage to pay off the balance. First, let s define a second mortgage.

Before you take the big step and put your more on the line, there are a few risks and other options to consider. If you own your own home, you are probably able to refinance and use that money for whatever your need. This way you would not have multiple credit card payments, but one second mortgage payment that you would make to the same lender that takes care of your house payment. You could use this money to pay off your credit cards. Your lender can probably offer a much better rate than the high interest rate credit cards you have. Obviously the lower interest rate will save you money, but will the fees of the second mortgage make the deal seem wary? Before you sign papers on a second mortgage, you will need to do your math to make sure that you will be saving money in the long run.

Look into other options such as consolidating debt with a zero or low interest rate credit card. You might also be able to make a repayment plan on your own with a simple budget. This is a much better option for those with smaller amounts of debt. You will also want to consider the risks that come along with a second mortgage. Taking out that second mortgage changes all of that. With credit cards, you won t lose your car or house if you can t pay up.

You still have the debt, you just owe it so someone else at a better interest rate. If you cannot make both of your house payments, you could easily lose your home. This time, you are using your home as collateral. To be realistic, you are putting a lot on the line when you take out that second mortgage. If you do decide to use a second mortgage to pay off credit card debt, there is one very important step that has to be taken. This is the number one reason why financial advisors do not recommend this to those with credit card debt. You must cut up your old credit cards.

The second time around you won t have the equity in your home to bail you out of debt. Having credits cards in your wallet with a zero balance will simply lure you into using them again. Be sure to destroy your credit cards so that you don t even have the option of using them. Because refinancing your home to pay off credit card debt is not recommended, you might consider making a budget instead. There is no way to solve debt problems with the same thing that got you into debt. Find out where all that extra cash is going and learn to cut back in areas that don t matter to you.

Free up some cash to put straight towards your credit card with the highest interest rate.