It turns out many customers are having entirely rational reactions to rising interest rates (and perhaps the new bankruptcy law). They're taking the sometimes painful steps necessary to reduce credit card debt before it gets too onerous.Some are also making use of the low rates on mortages to pay off debt via home equity loans, which just moves things around. But let me confess a remarkable lack of sympathy with the financial industry just now...
(via a furling at Medley)
2 comments:
(have had a very long day with an early start at work including a trip up to Baltimore... so vegging out for a bit at my desk now commenting on random things instead of working...)
I think the home equity option does more than just move things around. Depending on the rates a cc company is willing to offer, you might be able to get a better interest rate on a home equity loan or credit line. Also, any interest paid on a home equity line is very likely tax-deductible.
I found this story interesting because I'm one of those who's been aggressively getting debt (in various flavors) paid off over the last year or so in light of low rates and the likelihood that they'll start rising soon. (And also because I'm finally at a point where I can get some paid off, but that's another story.) I do think there's going to be economic bad times soon and want to be out from under as much as possible before the bad stuff hits. Coincidentally, I reached a major debt reduction milestone this weekend - several more to go, but moving forward..
Medley
uncorked.org
well, I didn't mean to dismiss home equity loans -- for sure, a loan at 4-5% used to pay off debt at 14-18% is completely a good use of resources. unless you leverage your entire equity in the house and end up in a different kind of trouble (which seems a worry with the crazy home financing deals Atrios and others have been noting around the country).
but some kinds of debt are definitely worth paying down. low-interest loans, maybe not (since your money would presumably earn more in other investments), but anything with a high % is great (where else can you get 15% on your investment right away?!). congrats on any progress -- there's a lot of mental relief, if nothing else, to tidying the books substantially!
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