Susan is disabled, but works part time to supplement her disability income. In spite of having low income she managed to build a great credit rating buying items on a time plan from local businesses. When she applied for a credit card she was thrilled to learn she was approved. After the one, she applied for others. Susan loved to lavish gifts on her many nieces and nephews, but the fact of the matter is it also helped to alleviate some of the guilt she felt that she owned the family home, free and clear.
Her siblings had never uttered a word of complaint, but still Susan felt uneasy that her parents had left the home to her. She secretly felt the home should have been sold and the money divided up between the siblings, but on the other hand her siblings were all well off and had nice homes and none of them begrudged Susan for one minute. Unfortunately, the old home was beginning to need repairs and attention, so this helped to increase the credit cards quite a bit.
After some time it got to be that she was making only the minimum payments and her credit cards were all maxed. As I said earlier, I mentioned she should look into debt consolidation but she chose a different route. She decided she would rather take out a mortgage on the family home. She applied for $15,000 and the person handling her loan talked her into taking $20,000. Susan only needed $15,000 to cover the credit card debt, but she had had her eye on a California King bedroom set, and a Tiered Roof Hexagon Gazebo the two of which cost right about $5,000 so she decided to take the $20,000.
The mortgage was for thirty years, so Susan’s payments were very affordable. I suggested she make double or triple payments since that was about what she was paying for the minimums on her credit cards. She wasn’t too excited about that idea, and worst of all she started using her credit cards again! The last I heard she was pushing $6000 in credit card debt and getting to the point where she was unable to make much more than the minimums.
Let this story be a lesson to you. Don’t let yourself fall into the same trap.