Refinancing Credit Card Debt

Refinancing credit card debt is now probably on the minds of millions of Americans who have been rudely awakened to the reality that lending institutions that extend unsecured loans could at any time call in some or all of the debt owed. No person in regular America, that is those who are outside the walls of the federal government and Wall Street secrets, yet knows the extent or the decay of the financial state of the country. Despite assurances by those who have everything to lose that "all is fixable, just give us time," there is a clearly defined sense of worry on the minds of Main Street and now must come ways to dig out of the credit malaise as quickly as possible. Ridding oneself of unsecured money obligations may be one of the solutions many will have to pursue.

It is estimated that there is almost a trillion dollars of credit card debt in the United States and that almost seventy percent of Americans live pay check to pay check. These two factors portend a very unsettling future for they reveal that the large majority of Americans have almost no savings. Laden down by debt, most of it being unsecured such as credit, charge and signature loans, less and less money is available for regular household bills such as food, utilities, mortgages and household expenses. The result is clear: unsecured loan obligations are choking us to a slow death. Because of the American situation, refinancing credit card debt may be a very difficult problem. In fact the whole idea of reconfiguring unsecured loan debt is kind of like putting a bandage on a severed artery. Not effective by any means because the problem is the debt, period.

The first and only effective to way to refinancing credit card debt is through a home equity loan. Home equity loans, depending on the charge balances and the equity in the house, can assist the consumer in consolidating unsecured loans with one loan that is much lower than all the other loans combined. A home equity loan is based on the amount of actual ownership one has his residence, and if there was a large down payment, and a number of ensuing years of faithful monthly payments made on the mortgage, there may be enough to leverage a new second mortgage or home equity loan. Since the old plastic card accounts can reach as much as thirty percent, a home equity loan that, if obtained from a bank, can be as low as prime plus a few points. These loans are variable interest loans and can rise or fall on market conditions, but are far superior to the high interest rates of unsecured debt.

A home equity loan offered by a bank or credit union will be the lowest rate second mortgages found. The credit pyramid has banks at the base of the pyramid with low rates and the best terms, but also the most qualifications for borrowers to meet. With recent bank upheavals and more to come, it may become necessary to have a FICO score of seven hundred and fifty to even be considered for any type of loan from a banking institution, including credit unions. But a FICO score is weighted not only on on-time payments each month, but also how much a charge account is holding. In other words, an account that is above fifty percent of its allowable limit is a real liability in the eyes of the three credit reporting bureaus. It's a vicious circle for the cardholder who needs refinancing credit card debt, for the most positive solution may be the one not within reach because of that very money obligation.

Other refinancing credit card debt lending sources such as loan companies are willing to take a much higher risk on an already maxed out client, but their costs may clearly outweigh the reason for even getting a lending transaction. These sources represent the higher portion of the lending pyramid, allowing more customers to be available for money, but at much higher costs. The one redeeming quality for these high risk, high interest lending companies may be that though the money lent to the customer is higher, payments may be able to be spread out over many years. Of course, the overall cost of refinancing credit card debt is higher, however the payment might be somewhat lower than the present multiple accounts being paid each month. If all of us are really honest, the admission that the desire for stuff we can't afford has been a huge reason the country is where it is today. We ought to heed the words of Jesus who reminds us of what is really important: "Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal." (Matthew 6:19)

Perhaps the real issue isn't about refinancing credit card debt but rather about deciding what is really important in life. Many people are now calling for a simpler and more winsome America, more attuned to living without all the glitter and glam Madison Avenue says we need to be happy. Maybe the idea of refinancing credit card debt ought to rather be how to jettison debt altogether. Living within one's true means, selling off a lot of what we once believed to be so important and putting that money on the obligation mountain, placing more attention on being satisfied and content where one is and who one is may be the real answer to much of where America finds herself now.