You can't borrow your way out of debt!
Borrowing money for any reason often times boils down to what is appropriately labeled, "Gotta have it now syndrome." It may also be debt denial. Many within our society try to borrow their way out of debt. This is a form of debt denial. Whether you borrow money in an equity loan, a consolidation, or any other reason, it could be debt denial.

Borrowing to pay off debt may or may not be a good idea. If it is done to get out of debt, it is good. But if in doing so you get deeper into debt, it could be debt denial.

Although operating on cash may be an over simplification when it comes to a house or a car, there is still great merit in the philosophy. If you can't afford to pay for it in cash, you can't afford it.

Don’t Fall Into the Debt Denial Trap
Some debt relief clinics have clients that have been with them for 2 to 3 years. Their credit scores increase along with their positive payment history while their debt has decreased. They have only 2 years to go at what has been set up for them, and they go shopping for equity loans. They set up at an average rate of 8% and they can get a loan using the equity in their home for 6.5%.

The debt denial trap begins when they can get some cash out in addition to paying off the remainder of the credit card debt in the program. They can also stretch out the time and lower their payment. A lower payment means MORE TIME IN DEBT. They also convert unsecured debt into secured debt. They tie up their most valuable assets, so they can spend more money.

IF YOU CAN'T PAY CASH FOR IT, DON'T BUY IT.

Another thing that happens, is when people pay off their credit cards with the equity in their home, banks reissue their cards to them. More often than not they get back into the practice of using the cards again.

In 2 years they would have paid off everything without borrowing more, but some people just can't stop borrowing. They pay through a program for 2 or 3 years and then as soon as they find out that they can qualify for more credit, they take advantage of it immediately.

For the past 4 years interest rates have been so low and credit so loose that it has gotten to the point where just about anyone can get approved for a home equity loan. Rates could be as low as 6%. Through a credit counseling program they will end up with an average of about 8%. This is WITHOUT turning unsecured debt into secured debt. This should be avoided at all costs.

Is 3 Months Worth The Gamble?
Take a look at the difference between 8% and 6% on $10,000 paying $200 per month, a whopping 3 months.

Payoff time at 8% is 61 months

Payoff time at 6% is 58 months

The consumer gets a home equity loan and ties up their most valuable asset. They pay off the credit cards with the money, and then turn around and do the same thing again.

It seems like no one would want to tie up their equity and turn unsecured debt into secured debt for a mere 2 points? But they do it all the time.

YOU CAN'T BORROW YOUR WAY OUT OF DEBT ! Credit Counseling offers a way to pay down the debt WITHOUT borrowing. Credit Counseling can lower your interest rates, save your credit, and even get you approved for additional loans after you demonstrate a positive payment history.