2nd Mortgages to pay off Credit Cards, then destroying cards. Bad move.

OptionGuru

OptionGuru

2nd Mortgages to pay off Credit Cards, then destroying cards. Bad move.

That's a common thing to do and encouraged by banks and business writers. You rack up lots of credit card debit then get a 2nd mortgage to pay off the cards, then cancel the cards. Seems OK - You now got a lower interest rate.

BUT there is a major drawback. Can someone guess what that drawback is, why should you not cancel the cards?




:)
 
Cause you can't go on a nice holiday, buy 2 nice new Mountain bikes, a newer car and buy loads of nice food ??

When eventually you run out of credit, it's all maxed out and your just working to pay back the man, try to get ran over by a bus :)

Or go bankrupt your call!
 
You're on the right track Turveyd ......... The problem with what the banks encourage is that you are turning Unsecured Debt into Secured Debt.

If you are in a situation where you might have to declare bankruptcy the banks can go after the secured debt easier. By keeping the credit cards you can get cash advances before you go bankrupt as a last resort.



:)
 
Yep, if your in the hole, without a 2nd mortgage, odds are you'll be back in the hole, without the Credit Cards you can't bail yourself out for a while.

Once you start heading down this path, your ultimately doomed anyway, so you might aswell hold out longer and have some fun.

I had a good contract, paid off a 10K credit card, expecting to part live off it, till next contract paid off, but reduced interest so all good, the buggers reduced the card to 1K, leaving
me pretty much screwed.

Banks, got to hate them!!
 
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