Are you using credit
to pay off old debt?
Written By Ellise Walsh
If you are stuck with a bunch of old debt and
find yourself using your credit cards to finance this debt, you could be
doing yourself a grave financial disservice. Using credit to pay off old
debt is almost never a good idea. If you look around, you should be able to
find a better and more cost effective way to retire the old debts you have
been carrying around.
For instance, one type of debt that can seem to last forever is student loan
debt. A quick look at the numbers reveals why this is so. College tuition
costs have been rising far higher than the overall rate of inflation for
many years now. The compounded effect of these constant tuition hikes can
make college totally unaffordable without financial aid.
While there are a number of excellent student loan packages available to
college students,
If you own your own home, you may be able to use a home equity loan to
retire your old debt. The interest rates on home equity loans are almost
always much lower than the interest rates on credit cards or other types of
loans. If you have built up equity in your home during the recent housing
boom, you may be able to tap this equity to finally get rid of that old debt
you�ve been carrying for years. Just remember, however, that you are
pledging your home as collateral. This means that if you are unable to make
the payments, your home could be at risk of foreclosure. Be absolutely sure
that you will be able to afford the payments on a home equity loan. Also be
sure that you use the proceeds of the loan only for debt repayment and not
for more spending.
A personal loan from your local bank can also be a good way to pay off old
debt. Like a home equity loan, a personal loan will likely carry an interest
rate far lower than that you would pay on your credit cards. Using credit to
pay off old debt is the worst thing you can do and will only get you further
and further into debt. By using a personal loan, you can eliminate your old
debt and have one monthly payment instead of the many you may be making now.
Paying off old debt can be a difficult thing to do. The debt that took only
days or months to create can end up taking years or even decades to get rid
of. But being aware of the many options besides using credit can make your
financial life easier and put your mind at ease.
