Serial refinancers is a term I heard Scott Terrio use on the Debt Free in 30 podcast, and it really resonated with me.
Much like serial murderers, serial refinancers just keep going back to the well and refinancing their debts with consolidation loans or similar debt vehicles. Much like serial murder (or murder in general) this is very bad! Consolidation or refinancing of a debt is supposed to be something you do once (if ever), not every 2 years.
A good point that Mr. Terrio makes is that with the new credit rules in place, you are more likely to get turned down for a consolidation loan. 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 going to Payday loan and alternate finance firms, most likely, which will simply accelerate the process of insolvency, or the personal finance death-spiral of serial refinancing.
Refinancing is Bad?
Yes, refinancing debt is bad in business and it is bad in your financial life as well. If you are carrying a huge credit card debt, refinancing looks like a life-line. It may be a life-line 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 favorite bankruptcy trustee’s number around in case.