Serial refinancers is a term I heard Scott Terrio use on the Debt Free in 30 podcast, and it resonated with me.
Like serial murderers, serial refinancers keep going back to the well and refinancing their debts with consolidation loans or similar debt vehicles. This is very bad, much like serial murder (or murder in general)! Consolidation or refinancing of a debt is supposed to be something you do once (if ever), not every two years.
A good point that Mr. Terrio makes is that you are more likely to get turned down for a consolidation loan with the new credit rules in place. Yes, credit is still loose, but the rules are tightening things up. Mr. Hoyes and Mr. Terrio are not seeing more folks coming into their offices with these problems, but it is still early. The new financing rules only came into play at the start of the year.
What will happen when this tighter credit takes hold? More folks are going to a Payday loan and alternate finance firms, most likely, which will accelerate the process of insolvency, or the personal finance death spiral of serial refinancing.
Is refinancing Bad?
Yes, refinancing debt is bad in business, and it is bad for your financial life. If you are carrying a considerable credit card debt, refinancing looks like a lifeline. It may be a lifeline but if you are not going to delete those credit cards from your financial life, you are setting yourself up to fail.
I know serial refinancers. I have tried to point out the folly of their ways. I have not succeeded in most cases, but I can see the path (i.e. financial death spiral) they will follow, so I am keeping my favourite bankruptcy trustee’s number around in case.