Credit card debt has a way of getting out of control.  Small balances can quickly become financial burdens when a missed or late payment results in late fees and an increase in the interest rate.  One strategy for dealing with this type of problem is to refinance the debt.  If you find yourself in this situation, and are looking at ways to pay off your credit card bills, do yourself a favor and keep your eyes averted from your home and your car.


It might be tempting to apply for a loan using your home or car as security.  You will generally get a lower interest rate by providing security to the lender than you would with an unsecured loan.  However, by giving the lender a security interest in your house or car you are giving them the right to take your property if you default on the loan.  Before you use your house or vehicle as collateral, step back and take a hard look at your financial situation.  Are your financial troubles the result of bad spending habits?  If after reviewing your income and a realistic budget you believe you can afford your house, car and other household expenses, plus a payment associated with a home equity loan or title loan, then taking out a loan to pay off your credit cards may be a good idea.


However, if after reviewing your income and budget, you realize that you don’t earn enough money to meet all of your financial responsibilities, then taking out a home equity loan or title loan is going to cause your home to be foreclosed or your car to be repossessed because eventually you will default on the loan.  If you are in this situation, consider ways to reduce your monthly expenses.  This may mean selling your home and finding a less expensive place to live or downgrading your vehicle.  You are generally better off if you act proactively to resolve your financial situation before you default on your secured loans because it gives you the opportunity to extract any equity from the property rather than losing it to the lender.  If after reviewing your financial situation you realize that you cannot afford to repay your debt, consider speaking with a bankruptcy attorney.

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