The Hidden Agendas Behind Financial Advice Websites
Navigating the financial landscape today can be daunting, especially when you’re buried under credit card debt. While the internet offers a plethora of advice, it's essential to tread carefully. Too often, those seemingly benign guides you stumble upon might have ulterior motives.
The ubiquity of financial advice websites may make them seem trustworthy. Just search "My credit card debt is too high" on Google, and you'll be bombarded with countless “4-Step Guides” to combat debt. But a closer inspection reveals a concerning trend.
Consider three such guides I recently reviewed:
•Guide 1: advised paying off cards individually, starting with the one with the highest interest rate. It also suggested considering a debt consolidation loan, such as home equity, and reviewing your spending.
•Guide 2: recommended paying off cards similarly, working directly with creditors, and mulling over debt consolidation with home equity or looking at a debt management plan.
•Guide 3: took a slightly different route by suggesting opening a new credit card for balance transfers, borrowing from friends, and considering debt consolidation with home equity.
What's alarming is the recurring theme of ads for new credit cards and home equity lenders on these sites. It begs the question: who's funding these platforms?
If you're resorting to Google for financial advice, options like borrowing from friends or just paying off high-interest cards may not be feasible. These websites, instead of offering genuine assistance, seem more like traps designed to ensnare desperate individuals, guiding them towards new credit cards or home loans.
And their top advice for those grappling with credit card debt? Leveraging home equity.
This strategy might have held water a few years back when interest rates hovered around 3.5%. But with the current 30-year fixed rate averaging 8.5% for those with commendable credit, the repercussions can be severe.
Let’s break it down with a quick math lesson. If you currently own a home with a $250,000 mortgage at a 3.5% interest rate. Monthly, you're paying $1,123 without tax and insurance, culminating in a total repayment of $404,139 over three decades. But if you refinance today at the new rate, your monthly payment skyrockets to $1,925, with the total repayment reaching a staggering $692,020.
That’s a whopping difference of $287,881! How can any reputable resource advocate for such a method to pay off credit card debt? Simply put, lenders are in the business of lending.
If debt is casting a looming shadow over you, consulting a bankruptcy attorney should be your first step. Even if you’re sure you’re not going to file, knowing your rights when filing for bankruptcy empowers you to negotiate more confidently with creditors, who are undoubtedly aware of what bankruptcy entails for them. Moreover, filing for bankruptcy has no bearing on your mortgage rates, enabling you to safeguard your home equity and that 3.5% interest rate. Preserving such a low rate is crucial in and of itself.
Furthermore, if overwhelming debt coincides with you lagging on mortgage payments, Chapter 13 bankruptcy offers a lifeline. It halts foreclosures, shields your low interest rate, and erases other debts. This allows you to focus on your home and family’s well-being. Add perks like lowering balances and interest rates on car loans or even eradicating federal student loans, and the advantages of bankruptcy become indisputable.
In conclusion, be aware of the “free” advice all over the internet. If you’re in real financial difficulty, go old-school and talk to human being who understands the legal landscape and what’s available to you.