Welcome to Ask Clark, a column designed to answer your financial questions, by money expert Clark Howard.
Should I Roll My Credit Card Debt Into My Mortgage?
Chris from Rhode Island asks: “I’ve received offers to roll my credit card debt into my mortgage, and it seems tempting. Is this ever a good idea — and under what circumstances?”
Clark’s Take on Whether You Should Roll Your Credit Card Debt Into Your Mortgage
Clark says: It may seem to make sense to refinance your mortgage to cut your credit card interest rate by a third, but there’s more to consider.
“First, you’re taking debt that’s against your name and putting your home at risk,” he says. “Second, you’re taking debt that you don’t want to have in your life, and you’re making that existing credit card debt an obligation for 30 years.” And he points out a common phenomenon when people do choose to roll their credit card debt into their mortgages.
“The thing I’ve seen repeatedly over the decades is that when someone rearranges debt that way, you’re not paying it off, you’re rearranging it,” Clark says. “The credit cards end up being charged up again usually around 18 months,” Clark says.
Clark recommends setting up a goal to wipe out your credit card debt in three years or less.
“I’d rather you go on a path where you’re disciplined about paying down the credit card debt in a short cycle,” he says.
He also advises looking into peer-to-peer lenders like Prosper and Lending Club that allow you to take out a personal loan at a low rate so you can “wipe that debt off the books.”
Here’s how to get out of debt in seven steps.
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