Before the explosion of sub prime mortgages (and the implosion of the sub prime mortgage industry) sent our economy tumbling, most Americans initially turned to the family homestead to eliminate credit card debt burdens. With real estate prices around much of the country seemingly poised to endlessly rise to unbelievable heights, home owners gambled on equity lines of credit to eat up their unwanted credit card debt without ever bothering to concern themselves with the problem spending behaviors that first built up the loan amounts.
Now that the property values have tumbled back to earth and all but the most cautious of mortgage lenders have themselves been forced into bankruptcy protection, borrowers will find equity consolidation loans considerably more difficult to acquire. Under current conditions, borrowers will have to demonstrate absolutely perfect credit scores and rock bottom debt to income ratios to potentially qualify for any sort of mortgage consolidation: plus, obviously, sufficient appraisal value within the residence to create space for the credit card debt to be absorbed.
After the recessionary troubles of the most recent few years, this could be a difficult trick for any borrowers to pull off, much less consumers with credit card debt loads so large that they would need to think about equity consolidation in the first place. Credit scores must now be over seven hundred points, perhaps even seven hundred and forty points, to have the credit card debt consolidation LOCs automatically be found eligible by underwriters; just a few years ago, FICO scores of just six hundred and twenty points would have been judged suitable.
Similarly, the debt to income ratio, while once perfectly acceptable hovering about forty percent – this refers to the minimum monthly payments for all revolving loans, including credit card debt accounts, in relation to the combined gross household income – has now fallen to around thirty percent. There's other factors at play, you have to understand, than just the credit card debt. Student loans, car loans, tax liens, and alimony, child support, or other court mandated monetary obligations will all likely weigh more than the credit card debt regarding the DTI equation: the sole saving grace on infinitesimal monthly minimum payments. If anything, the projected credit card debt consolidation helps out the DTI by further lowering payments. For the average American family, though, juggling so many bills against flat earnings, the acceptable levels are still out of reach.
Of course, this still isn't the hardest part about trading that every more precious home equity – still diminishing, around some parts of California or the Northeast – for credit card debt consolidation. Remember, in return for the lower interest rates and hopes (largely overblown, unless you've a talented accountant specializing in IRS loopholes) of tax breaks attached to the credit card debt, you're also threatening the primary family residence in the event you'd be unable to satisfy the monthly demands. Depending upon the mortgage lender, it's possible that even a single payment mailed one day past the due date could be summarily rejected, setting in motion a string of events wholly intended to force foreclosure proceedings. This is, once more, the absolute worst possible outcome for credit card debt consolidation. Still, just the fact that it happens every week to unfortunate American families, should be enough to convince all consumers to step wisely whenever investigating the home equity mortgage consolidation program and instead turn to solutions like settlement negotiation for their credit card debt woes.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
