BEVERLY, mass., January 20, 2022 /PRNewswire-PRWeb/ — lendah, one Boston-based financial services company, today urged caution in this new year as more consumers make the mistake of turning to their secured assets to pay off unsecured credit card debt.
“Americans have benefited from incredibly low mortgage rates in recent years, and these rates are wonderful for home ownership or refinancing, especially for first-time buyers,” he said John Caron, lendah co-founder. “There’s a dangerous side to these attractive interest rates, and that’s a person risking their secured assets for credit card debt that’s spiraling out of control,” Caron added.
The US Federal Reserve reported that US household debt rose to a new record of between July and September $15.24 trillion, up 1.9%, and $286 billion, from the second quarter of the year. Equally worrisome, Federal Reserve data showed that credit card delinquencies — late payments of 90 days or more — were also up sequentially.
Credit card spending has skyrocketed 17 billion dollars in the third quarter of 2021, and the number of loan applications over the past six months — an indicator of consumer credit demand — was 122 million, up 1.3% quarter-on-quarter.
Refinancing involves jeopardizing a property’s equity or down payment for an interest rate that is significantly lower than rates found on credit cards, personal loans, or other expensive options.
However, there can be pitfalls when using this type of loan.
The monthly mortgage payment increases with these loans, and if a borrower cannot make the payments, they risk default and foreclosure. While a default on your credit card or personal loan can damage your credit score, a borrower is unlikely to lose their home.
Another potentially detrimental and often underestimated element of this type of transaction is the closing cost, or fees, of the loan, which can either be paid up front or built into the loan.
“Depending on the fees incurred during these refinances, a borrower may pay interest on these fees for the life of the loan, and the value of this credit card debt rescue refinance could decline sharply over time,” Caron said. “Most importantly, turning that unsecured debt into secured debt means very little to a person’s overall financial condition if they continue with their bad spending habits and begin to re-leverage their credit cards.”
Those facing extreme credit debt should pay off their debt as soon as possible. For those who only pay the minimum, they could end up paying two to three times more than the amount originally borrowed. If you are looking for help, please stop by http://www.lendah.com.
lendah is a specialty financial services company focused on helping consumers restructure and pay off their credit card and revolving debt. Since our inception, we’ve helped thousands of consumers find loans and options to consolidate their debt. We’re a regular bunch of smart Bostonians dedicated to finding a personal lending solution that’s right for consumers. We focus on a lending solution, not a lending company. Lendah offers a one-to-one loan matching service to help consumers get the best loan terms and results. Learn more at http://www.lendah.com.
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