A Redditor With A 710 FICO Score Asks If Consolidating $20,000 In Credit Card Debt Is The Right Move: 'I'm In This Weird Limbo'

Debt consolidation allows you to group all of your debt under one umbrella. If you have high-interest debt like credit card debt, consolidation can also help you secure a lower interest rate. However, debt consolidation doesn't always make sense. 

A Redditor in the Dave Ramsey subreddit recently asked about consolidating $20,000 in credit card debt. The individual is looking at a home equity loan but is on the fence, hoping that interest rates go down.

"I'm in this weird limbo," the Redditor explained.  

Don't Miss:

• Deloitte's fastest-growing software company partners with Amazon, Walmart & Target – Many are rushing to grab 4,000 of its pre-IPO shares for just $0.26/share!
• Can you guess how many retire with a $5,000,000 nest egg? The percentage may shock you.

While the Redditor framed their question around waiting for rates to go down or tapping into home equity, commenters had other thoughts.

Use The Debt Snowball

The debt snowball is a popular method that involves paying off small debt first, building small wins, and using that momentum to become debt-free. Multiple commenters said that the original poster did not need to consolidate debt.

Even if rates go down, it's expensive to take out a home equity loan. You have to pay origination fees and closing costs. Those expenses make it harder to get out of debt, and you can use that extra money to cut down the credit card.

Trending: BlackRock is calling 2025 the year of alternative assets. One firm from NYC has quietly built a group of 60,000+ investors who have all joined in on an alt asset class previously exclusive to billionaires like Bezos and Gates.

Assess Your Spending Habits

Multiple commenters also pointed out that the original poster had to practice some bad financial habits like impulsive spending to end up with a $20,000 credit card balance. 

"The most important bit here is correcting the behaviors that got you in $20,000 of credit card debt in the first place," one commenter stated. 

Some people use home equity loans and HELOCs to enable their bad spending habits. These financial products have lower rates and kick debt repayment further down the road. You can get a term of up to 30 years to minimize monthly payments. It's not necessary to go that route, but the fact that it's an option demonstrates how easy it is for people to ignore debt.

It only makes sense to consolidate debt if you have corrected your financial habits. The Redditor should work hard to trim their credit card debt for a few months before considering a home equity loan. However, if the Redditor does it correctly, the credit card debt will be much lower, 

and borrowing against home equity will make even less sense. 

See Also: Hasbro, MGM, and Skechers trust this AI marketing firm — invest pre-IPO from $0.60 per share now.

Don't Gamble On Rate Cuts

Waiting for rates to go down is a risky game. You will end up with a higher interest rate for more months as you wait for APRs to drop. Granted, it's still not good to consolidate without correcting bad financial habits. However, it's even worse if the only reason you're not consolidating is because of the possibility of rate cuts.

One commenter explained it succinctly, "It's foolish to ‘gamble’ on lower rates for basically anything."

The commenter proceeded to assert the original poster is letting the fear of missing out drive their decision. Gambling on rate cuts won't work out well if the Fed hikes rates. While this scenario is unlikely, you never know what can happen.

"As an example of FOMO, there are people that have been holding out on a housing crash for five years to ‘buy it when it's cheap,' while median home prices have risen by ~45% in the same timeframe," the same commenter mentioned.

The best approach may be for the Redditor to assess how they got into this situation and find a way out that doesn't involve refinancing or extending debt.

Read Next:

• With high-demand properties in the Midwest, Bam Capital has delivered 2.46x equity multiples in just over 3 years. No losses. No missed payments. Learn more about becoming an investor today. 
• ‘Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. You can invest today for just $0.26/share with a $1000 minimum.

Image: Shutterstock