2010 Frugal Living Guide
smart spending
When is taking on debt wise?

Covering credit card debt with loans
Next
5 of 7
Back
Covering loans with credit card debtTraditionally, 30-year mortgage loans as well as student loans to pay for a college education have been considered wise debt. However, in recent years, many consumers have used this wise debt to pay off their consumptive debt, confusing the two types of debt and extending the time it takes to pay for everyday purchases.

For instance, many people use a home equity line of credit, or HELOC, to pay off credit card debt, assuming that the tax incentives that come with a HELOC makes it a wise decision.

"The sad reality is that the majority of homeowners who do this, upwards of 70 percent, will not adjust their corresponding spending habits and will, within a year or two, charge their credit card balances right back to where they were when they paid them off with the HELOC," says Todd Christensen, director of education at the National Financial Education Center at Debt Reduction Services Inc., in Boise, Idaho.

"Like using a HELOC to pay off consumer debt, using a student loan to pay off credit card debt means that 10 years after graduation, the student will finally pay off the pizzas and music downloads he purchased in college," Christensen says.


 

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
REFINANCE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed refi 4.08%  0.04 4.12%
15 year fixed refi 3.18%  0.03 3.21%
10 year fixed refi 3.21%  0.04 3.25%
 
View Rates in your area Next
Product Rate Change Last week
30K FICO-based HELOC 4.30%  0.03 4.27%
50K FICO-based HELOC 3.96%  0.01 3.97%
100K FICO-based HELOC 3.81%  0.01 3.82%
 
View Rates in your area Next
Product Rate Change Last week
60 month used car loan 2.75%  0.10 2.85%
48 month used car loan 2.99%  0.07 3.06%
60 month new car loan 3.20%  0.05 3.25%
 
View Rates in your area Next
Product Rate Change Last week
1 Year CD 0.99%  0.01 0.98%
2 Year CD 1.22%  0.02 1.20%
5 Year CD 1.87%  0.04 1.83%
 
View Rates in your area Next
Product Rate Change Last week
Balance Transfer Cards 15.76%  0.01 15.77%
Cash Back Cards 16.44%  0.04 16.48%
Low Interest Cards 11.04% --0.00 11.04%
 
Next
advertisement
FRUGAL NEWSLETTER

Discover new ways to cut costs and save more every day. Reduce your spending, not life’s pleasures. Delivered weekly.

advertisement
Partner Center
advertisement

Connect with us