Credit Card Debt Collectors Are Advising People To Refinance Their Home or Take Out Home Equity Loans to Pay Them! DON’T DO IT!

19 Apr Credit Card Debt Collectors Are Advising People To Refinance Their Home or Take Out Home Equity Loans to Pay Them! DON’T DO IT!

I am disturbed to hear a lot of my clients being told by debt collectors to refinance their home or to take out a home equity loan to pay the debt.

Don’t do it.

especially if the debt is for an unsecured debt such as Mastercard, Visa, Discover, American Express, department store card, or a medical bill.

You would be turning debt that would be dischargable in bankruptcy to secured debt – debt that you will have to continue to pay if you want to keep your home.

By refinancing your home or taking out a home equity loan or line of credit, you may incur additional fees.

Plus, if you have bill collectors calling you, your credit is probably already damaged to the extent that you will have to pay higher than normal interest rates and/or take out a loan that is not as good as what you already have on your home (for example you are currently in a fixed rate loan but can currently only qualify for an adjustable rate loan).

If, for some reason down the road you are unable to make your house payment, you have put your home at risk of going into foreclosure.

It is not worth the risk of losing your home just to get a bill collector paid so they will stop calling you.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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