We Consolidated Our Debt But Right Back in the Same Spot Again. – Melissa

“Dear Steve,

Two years ago we refinanced our house to pay off some debt and get rid of our ARM loan, but we were stupid and now are in the same position with credit card debt. Would it be smart to refinance to try to get a lower payment? I keep getting things in the mail saying “You can lower your mortgage payment to $900!!” etc. Are they all scams? Our payment right now is $1350 and after other bills we barely have enough for food and gas. Our mortgage company has already deferred one month’s payment because my husband was laid off, so I don’t think they would be helpful in modifying our loan or anything. I’ve already talked to the credit card companies and they have lowered our rates and payments by temporarily closing the cards. The only other thing I can think of is to refinance and try to get a lower payment. What are your thoughts?


Dear Melissa,

You are not the first person to wind up back in this situation, and you won’t be the last. When I warn people about this possible outcome from consolidating and refinancing debt they always assure me they won’t get back in debt again. But as you know, they can and do.

No worries, let’s tackle the situation and get you a game plan so you can recover your life.

I had the following questions that I’d like for you to answer before I can answer your question.

As soon as you can post the answers to my questions above I’ll be able to help.

If any reader wants to

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Do you have a question you'd like to ask me for free? Go ahead and click here.

Damon Day - Pro Debt Coach
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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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4 thoughts on “We Consolidated Our Debt But Right Back in the Same Spot Again. – Melissa”

  1. I haven’t talked to anyone yet. I was referring to all the mail I get from companies saying I can reduce my mortgage payment if I call them. I was just wondering wether we should try to refinance to get rid of SOME of the debt, try to get a lower mortgage payment, or just stick it out and slowly try to pay it all down. Debt sucks and this is definitly a good lesson for us to learn.

    • Melissa,

      For some the refi makes good sense, for others it is just an opportunity to get back in debt. It’s an emotional thing, not a numerical one.

      Only you know your true nature and if you have the discipline to avoid the debt trap again.


  2. We have a fixed rate, 30 yr. mortgage. The interest rate is 6.5%.

    We have about $19,000 in credit card debt. We are paying $450 a month on those.

    Our home was appraised at $220,000 2 years ago, but that was right before the economy crashed. Homes are selling for about $200,000 now. We have $186,400 left on the mortgage.

    We plan on staying in our house for a while.

    Should we refinance to get a lower payment, or to pay off debt, or just keep trying to get by?

    • Melissa,

      In a perfect world you would be able to refinance at a low fixed interest rate for 30 years. But I think you’ll find that with your loan to value ration that not legitimate lender is going to do a cash out refinance to let you pay off the debt.

      What did the lender you found say about letting you borrow more than the market value of your home? The $19,000 would take you to $205,400 and that’s before factoring in any closing costs or fees associated with the loan that would probably be wrapped in.



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