| As a financial advisor, some of the best advice I can | | | | unfortunately, in the real world things do not function so |
| give my clients is to pay off high interest loans first in | | | | smoothly. The problem that most individuals find after |
| an effort to avoid paying unnecessarily high amounts | | | | refinancing their home is that they have zero balances |
| of interests. This means that you will ultimately be | | | | on their credit cards, and instead of maintaining those |
| paying less money in interest and more toward your | | | | balances, they proceed to run up their credit card bills |
| outstanding balance, and paying off your balance | | | | once again. Only this time, they have no more equity in |
| means eliminating your debt. Thus, in my professional | | | | their house to bail them out of financial trouble, and if |
| opinion, one of the best options for individuals to | | | | things continue in that direction, they are at more of a |
| eliminate unwanted debt is to use their home equity to | | | | risk of losing their home. Therefore, the refinance |
| pay off high-interest credit card debt. | | | | represents a temporary pause on the road to |
| The logic behind my advice is that I would prefer my | | | | bankruptcy. The moral of this story is that refinancing |
| clients pay 6-10% in interest as opposed to 18-30%. | | | | your home will help you pay off high-interest credit |
| The difference in interest paid corresponds to money | | | | card balances, but it will not help you acquire good |
| that can be paid toward the outstanding balance. | | | | spending habits. Discipline and moderation are the only |
| (Additionally, a number of individuals take advantage of | | | | way to achieve that. |
| the available funds to negotiate their accounts with | | | | In conclusion, if you are considering refinancing to help |
| credit card companies, which could result in paying | | | | relieve financial burden, I would definitely recommend it |
| 40-60% of the outstanding balance.) | | | | if it will help you save money. Just make sure that it is |
| Mathematically, my advice works out very well, but | | | | a step to financial freedom, not a path to more debt. |