Are credit card balances keeping you from becoming a homeowner?
- A recent survey reveals that credit card debt is a major factor in buying, or not buying, a home.
- If you carry a balance on your credit cards, there are steps you can take to eliminate it sooner rather than later.
Buying a home is a huge undertaking, and it requires a significant financial investment up front in the form of a down payment. Buying a home also means committing to an ongoing mortgage payment, as well as taking on peripheral expenses like taxes, insurance, maintenance, and repairs.
It’s natural to want to approach homeownership with a clean financial slate. If you owe money on your credit cards, you may want to put off buying a home until that debt has been paid off.
In a recent Rocket Homes survey, 46% of first-time buyers say credit card debt has hindered their home buying efforts a lot, while 36% say it has hindered them moderately or somewhat. Here are three steps you can take to get rid of credit card debt and move forward with your dreams of owning a place of your own.
1. Get a side job to increase your income
If you owe money on your credit cards, there’s probably a reason for it. After all, if you had the funds available to pay off your balances, you would. That’s why getting a second job might be a smart bet.
The beauty of additional work is that your earnings will not be allocated to existing bills from the start, as that money will be extra. You should be able to use your extra income to pay down your credit card debt. And if you earn enough extra money, that debt could quickly disappear.
2. Consolidate your debt with a balance transfer
The less interest you accrue on your credit card debt, the easier it should be to pay it off. That’s why you may want to consider a balance transfer, especially if you qualify for an offer that allows you to move your various balances to a new card with a 0% introductory APR.
Of course, a balance transfer isn’t an option you can take advantage of with any guarantee. To qualify, you’ll need a decent credit score. But you’ll also need a reasonably good credit score to qualify for a mortgage, so it’s worth seeing if that option is on the table for you.
3. Use a personal loan to lower the payment of your debt
A personal loan allows you to borrow money for any purpose, and you’ll generally pay much less interest on a personal loan than on a credit card. You could pay to take out a personal loan that is equal to your total credit card debt, pay off your cards with it, and then lower your personal loan at your least expensive interest rate.
When you owe money on your credit cards, taking on more debt in the form of a mortgage can seem daunting. And having a lot of credit card debt could easily be a deterrent to getting a mortgage in the first place.
If you really want to buy a home, do your part to free up more money to pay down debt and see if you can consolidate your debt in a way that makes it more affordable. Doing so could be your ticket to meeting an important goal, while improving your financial situation.
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