Consolidating your credit
So if you start spending on your credit cards before the consolidated debt is paid off in full, you’re actually making your situation worse instead of better.And it can be really tempting to start spending when you have zero balances.Credit card debt has a way of causing problems for your financial outlook.Unlike other debts that have fixed payments you can plan ahead for in your budget, the monthly bills on your credit cards vary depending on how much you owe.Ideally, you want the interest to be even less than that. Debt management program Reveal Answer Tip: Since your home was purchased with an FHA loan, it’s unlikely you have the equity necessary to use a home equity loan.If the interest rate is any higher, you won’t get the benefits you need to reduce your debt quickly. With 650 credit, it’s also unlikely you can qualify for the low interest you need on the other two options. Debt management program Return to question The biggest benefit of any debt consolidation option is that you make a plan that helps you eliminate debt quickly so you can pay off your debt in-full.
With that in mind, you have to have the discipline not to start spending before you’re done eliminating.You’re taking unsecured debt and securing it as your borrow against your home equity.If you fall behind on your credit card payments, they can threaten as much as they want, but the creditor can’t take your home without a court order.As a result, when you overcharge and rely too much on credit, your bills can get out of control and start to take over your budget.This is where debt consolidation comes in handy, because you rein in those high payments and simplify them into one low payment instead.
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On the other hand, the home equity loan means your home is at risk of foreclosure if you fall behind.