Verse of the Day: Don’t Pay Off Credit Cards With a Second Mortgage

May 19, 2007

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3 There were also some who said, “We have mortgaged our lands and vineyards and houses, that we might buy grain because of the famine.”

Nehemiah 5:3 (NKJV)

Isn’t it interesting that people were mortgaging their land and houses way back in Old Testament times (between 458-420 B.C. for the book of Nehemiah)? Some people will take desperate measures to solve desperate situations. However, I would recommend that no matter how tough the situation gets with credit card debt, do not take out a second mortgage to pay them off.

First of all, a mortgage is secured debt while credit card debt is unsecured debt. The mortgage is backed by the collateral of your house. If you can’t pay, they can take your house. Credit cards are unsecured in that they’re not backed with anything but your word and your credit score.

Secondly, you’ve got to get to the root issue before you will really fix the problem. The debt is not the problem; over-spending and not controlling your finances is your problem. The lack of income is your problem. Compulsive shopping is your problem and so on. So what happens when you pay off those credit cards with a second mortgage? In many cases, what happens is the credit cards will again be run up while you have the former credit card debt on a second mortgage and now your house is on the line. Because you only fixed the symptom and not the cause, you are now in double trouble. Don’t move debt around, especially unsecured debt to secured debt. Fix the root cause first.

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