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Credit Card Debt Settlement or Debt Consolidation Mortgage?

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We get a lot of inquiries from borrowers about the best ways to eliminate credit card debt.  They want to know whether they should enter a debt settlement agreement or whether they need a mortgage for debt consolidation would be a better solution.  First of all it completely depends on your situation.  If you have a lot of equity, then eliminating the compounding interest of credit card debt in a fixed second mortgage or debt consolidation loan is usually a wise move financially.  However if you do not have equity in your home, no lender will approve you for an equity loan or even a refinance loan that enable you to consolidate credit card debt.  Gone are the days when lenders would approve 125% loans for debt refinancing.  The only 125% mortgage programs left are the Home Affordable Refinance that only allow home refinancing with specific 1st mortgage liens that were backed by Fannie Mae or Freddie Mac.

Regarding credit card debt settlement relief, you have to be careful and verify the success of the debt relief company that you are considering.  Debt settlement can be a wise financial move, especially if you do not own a home.  However debt settlement can have negative implications for your credit, just like being late on your credit card bills can be or not making your mortgage payment on time.

The fact is that we are living in very uncertain financial times with low interest rates, a depressed housing market and an unpredictable stock market. With that being said it is important to remember that your decisions financially can have serious consequences on your wealth in the future.  Debt settlement, consolidation loans and second mortgages should all be carefully considered be before making a commitment.

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