Consolidate Credit Card
Debt with a 2nd Mortgage Ė Lower Monthly Payments
March 2nd, 2006
the day when you have multiple credit card payments due each month
and you either canít make the minimum payments or you are barely
making the minimum payments. This scenario may have just sneaked in
life recently due to the double minimum payment rules that the
government imposed on credit card companies. Another law makes
filing bankruptcy more difficult to be excused from the debt that
you have created.
It is always better to have a
plan of action financially before you get stuck in a corner.
Lenders like to extend credit when you donít really need it. They
are hoping in a way that you will use it and pay minimum payments
until the very last payment. This ensures the profit can be
maximized. They are in the business of making money. They make
money when you first use the cards and make more money when you pay
interest and fees.
If you are lucky enough to own a
home that has equity in it you may be able to get a 2nd
home mortgage with less qualification that you may with a regular
home loan. It is possible that you have a really great fixed rate
loan on the bulk of the house, but only need a little extra loan
that you can pay off in a faster time frame. You also want to get a
break on your taxes whenever you can. You probably will get a
better rate on the 2nd mortgage than you have with your
credit card. Interest rates can go all the way up to 30%. If you
get a 2nd mortgage you can sometimes get the current
interest rate or close to it. This will make if easier for you to
pay the amount down quicker without paying a fortune in interest to
the credit card company.
Because it is a home loan they
may only require the interest payment as the minimum payment. This
could help if you are really tight on cash at the time, but be aware
that 2nd mortgages may be only for a 5 year or 10 year
period. You need to plan ahead on this one too, whether you can
make the extra money soon as the can foreclose on your house when
loan term expires. You should consider retiring your credit cards
at this time so that you donít end up in worse shape than you
already are in. You should also work on a budget and get ready to
pay for everything with cash.
Come tax time the interest that
you paid on a 2nd mortgage is tax deductible. This
usually is well worth it as it gives you a break on taxes. The
interests that you pay on credit cards that are used for personal
use are not tax deductible. Consult your tax of financial advisor
if this strategy will help you as each personís taxes vary.
Bankruptcy laws have changed so
that your wages can be garnished for repayment of debt. The reality
is that you donít want to go bankrupt any time soon. It wrecks your
credit for 10 years and you really can be broke when you are
starting over again. By addressing your financial problems sooner
than later you could really turn it around. Bankruptcy maybe
wouldnít be the easy way out that it might have been in the past.
Even if you donít have debt
today, a 2nd mortgage can be a better line of credit to
have on hand just in case of extreme emergencies. If you lost your
job for instance, you went through your savings and you still didnít
have work, if you had a 2nd mortgage before all of this
happened without any balances on it, you could tap into that
financial reserve while your situation improves. If you try to get
a 2nd after you are out of a job, you might find that
they will turn you down.
With planning and budgeting it
is possible to turn around the debt that you may have. First step
is to figure out what your debt you have and how much income you
have. You then figure out what you spend your money on every month
and make a budget that you stick to. You look for ways to save
money, whether it is on interest on credit cards, to lower insurance
rates, to eating at home. Consolidating your credit card debt with
a second mortgage could be beneficial in many ways.
Best Syndication Staff Writer
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