What Your Customers Need to Know Before Choosing the Quick Fix Over the Real One
For many consumers (who are also your potential debt settlement customers), living in America can feel like living under a tremendous pile of crushing debt. For most adults these days, it is common to have student loan debt, car loans, a mortgage, and credit card debt. For others, you can add medical debt to the list as well.
It is only natural that many of your potential customers would look for a quick and easy way to get relief from some of the pressure by taking out a second mortgage, or by refinancing their home to pay off some of their more high interest rate debts. But this is problematic for many reasons—reasons that you in the debt settlement industry need to know.
Robbing Peter to Pay Paul
As of the writing of this article (spring 2018), home loan interest rates are low, and they’ve stayed low for quite some time now. Refinancing the mortgage to pay off high rate credit cards looks like a quick and simple way to get relief. But if the process isn’t done right, it can extend the term of your customer’s indebtedness, or worse.
With the potential of another housing bubble bursting, refinancing could expose them to owing more than their home is potentially worth on the real estate market—drastically limiting their options should an emergency or opportunity arise.
The Hidden Cost of Refinancing (To Pay Off Debt)
Another concern that should be raised for any potential customer looking to refinance their home to cover their credit card or medical debt is the cost of the refinance itself. Many consumers do not take the costs of refinancing into consideration when they entertain this option.
After all, the costs of the loan are included in the loan itself. This can look very attractive to a consumer who is paying the minimums on all of their debt, yet is still short on cash and looking to find some wiggle room.
Unfortunately, the cost of refinancing and the fact that rolling your high interest debt into a long-term commitment means they’ll be paying on more than they currently owe, and potentially for a lot longer, as well.
The Opportunity to Dig That Hole Deeper
The consumer looking at refinancing their home to pay their credit cards off should take a long look at the pros and cons of this tactic and another long look at themselves. An honest appraisal as to whether they are ready to make a serious commitment to addressing their spending habits and use of credit is definitely in order.
Many who refinance their home to roll up their credit card debt end up sinking even further into debt once they’ve gotten themselves some wiggle room. Help your potential customers to combat the urge to tap into their equity, as it may be the only unexhausted resource they have left.
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