Refinance Car to Pay Off Credit Card Debt?

Posted by administrator | 30/07/12 | Tagged Credit Card Debt

Refinance Car to Pay Off Credit Card Debt?
News from Fox Business:

Dear Debt Adviser,
I have about $ 6,000 in credit card debt at an average of 25% interest. Would it be a good move to refinance my car at 6% or 7% interest through my credit union and pay off these card balances? I have lots of equity in my car and a 660-plus credit score. Thank you.
— Fred

Dear Fred,
I am going to make an assumption here that something happened between the time you bought your car and now. Credit card debt at 25% interest and a credit score of 660 does not fit with the phrase “lots of equity in my car.” Generally speaking, most people who have car loans have little or no equity in their vehicles simply because cars depreciate in value so quickly. The fact that you have lots of equity means you probably made a fairly substantial down payment, or perhaps paid cash for your car. So my guess is that your finances were fat in the past but are thinner now.

The reason I say this is relevant to my answer. If something did already happen that negatively affected your finances (decreased hours at work, divorce, bad run in Vegas, etc.), there’s always the chance the bad news isn’t over. And if it’s not, you may need the opportunity to refinance your vehicle or just sell the car and trade down to get some cash for something more important than paying off credit card debt — like paying rent or buying food.

The…………… continues on Fox Business

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