If you've bought a house in the last 10 years, you know that real estate has been a very good investment, as house values have gone up fast.
But the very same reason that makes buying real estate a good investment - rising house values - also makes it difficult for many people to afford to buy a new home.
Especially if you have any credit card debt.
How exactly does credit card debt affect buying a house? If you're getting ready to buy a house, but you also are dealing with high credit card bills, here are 5 tips to think about:
1-Yes, you can buy a house when you have credit card debt
2-But the more credit card debt you have, the less money you can borrow for your mortgage
3-And the more credit card debt you have, the higher the interest rate on your home loan
4-If you've had problems paying your credit card bills, you'll get an ever higher interest rate and be able to borrow even less money.
5-So, if possible pay off your debts (or at least some of them) before you buy a home
6-Also keep in mind that when you own a home, you need to have some money available to use to fix unexpected problems that come up (and they will come up, sooner or later). So don't plan on using every penny to buy your home.
As you can see, buying a home is still possible when you have debt. But it will affect how much money you can borrow to buy a home, and how much you'll have to pay in interest.
If your debt is small, and you have some cash to use, pay off some of the debt. This will help you with your mortgage. But if your debt is high, what should you do?
Seek out professional help immediately. You may be able to lower the interest rates on your debt, and lower your monthly payments. And this will give you more money to use when buying your house.
There's no better feeling than owning your own home. After all, who wants to make their landlord rich? But it takes money, and careful planning, to be able to afford your home. Because there's no worse feeling than seeing the bills pile up and risk losing your home.
So while you can still buy a house even if you have credit card debt, don't think it's easy. If you find out that you cannot afford the home you want, either find a way to make more money or find a way to pay off your debts (or both), and come up with a plan that works for you. And before long, you'll be able to afford your own home!
Looking for help getting out of credit card debt? Visit http://www.debt-tips.com/debt.html and get the debt help you need. Don't let credit card debt ruin your life! You'll learn lots of different debt reduction tips for getting out of debt faster and saving yourself lots of money!
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What is the best way to payoff my credit card debt?
I currently have around 10,000.00 dollars of credit card debt on three different cards. I am paying 29.99% on two of them, and 22.99% on the other one.
I have tried to get a card with a better rate to transfer my balances to, but the issuers won't give me one because I am using so much of my available credit now. I have not had any late payments on my credit accounts, tho.
Should I try to get a home equity loan to pay off the cards, or is that a bad idea, too?
I know that I got myself in this situation, and I am wholly responsible. I do not feel right about declaring bankruptcy, but really want to get out of debt somehow.
If I am unable to get a lower rate, then I don't see a way to rid myself of the debt. Any advice?
Answer
I used to work for a large credit card issuing bank, so I feel I can offer some advice.
Bankruptcy is not an option for you- unless you are unable to work hard to repay your obligation. If you are capable of working a decent paying job, you will regret bankruptcy for the next 7 years or longer. That's probably a lot longer than it would take if you sucked up some tough months and paid your bills.
It's not likely for you to obtain a credit card with a lower interest rate- at least not one which can accomodate your total debt. You don't indicate what your credit history is, nor do you indicate your credit score.
However, there is something not quite right because you indicate you're paying 22 percent on your cards. Incedentally, 29.99 percent falls into usury in most states- in other words, you're paying more interest than the value of the loan. That's considered illegal and the creditor cannot pursue collection of debt from you.
Some states allow the market to dictate the usury limit, but again, most states do not allow above 24 percent.
In any regard, there must be something sketchy about your payment or credit history if you're paying more than 8-12 percent for credit card debt.
The best two options would be a home equity loan- you can usually get a much lower rate- but consider this- are you looking to make any improvements or possibly move over the next few years?
Also, look into a consolidation loan from your bank. It's not debt management, so it won't appear on your credit report as such. Debt management companies negotiate with your creditors to accept lower payments in an effort to pay your obligation. Good for your wallet, bad for your credit score.
A consolidation loan will pay your creditors in full while you make payments to your bank. Your bank will most likey ask you to close your accouts, which is good because you won't generate further interest, and your accounts will show as "paid in full as agreed". It will also cut off any temptation you may have to use your cards as credit becomes available, since they'll be closed.
Once you pay off the debt, you're in the clear to re-apply for new cards, and you will be in better position for new rates.
Make certain to ask if you pay more than the monthly amount whether it goes to principal or to interest. If it goes to principal, pay as much as you can above minimum each month. You're going to have to suck it up and grow up a little- live frugally and poor.
I also suggest not opening more than one card. A good rule of thumb is to live below your means, that is if you plan on saving for the future. If you can't pay in cash, (a house or a car being two exceptions) you don't need it right now.
The advantage of a consolidation loan over a home equity loan is that you're not using the equity (or your home) as collateral.
Good luck.
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