Financial Battle Home
Custom Search

Debt Consolidating

Picture of signing a debt consolidation loan Getting a loan to pay off your other debts is actually not a strategy itself, but it may get you out of debt faster considering that the loan has low interest rates. As long as your monthly payments are reduced, you’ll be able to pay on time and help your credit recover faster than expected. But keep in mind that consolidating a loan may have positive and negative effects on your credit score meaning it is still on the “it depends” category. On the positive side, if you pay off a credit card with a balance that's close to the limit, you may improve your “credit utilization ratio” (the ratio that compares your credit limits with the balances you are carrying), provided that you leave your credit card open after paying. On the negative side however, a new loan will show up on your credit report, which credit reporting agencies count as a risk factor and may hurt your credit score.

Unsecured Debt

I should make it clear not to refinance your home to pay off credit cards, its not wise to take an unsecured debt and turn it into a secured debt. If you can’t pay the credit card they can’t take your primary residence, if you can’t pay the higher home mortgage due to the refinance they could foreclose.
Total Credit Damage: Modestly positive or negative, fairly easy to recover