Mortgage rates got off to a slow start yesterday. It was hard to object considering that left the average lender in line with record lows. But today was a bit different. While most lenders were little-changed at first, many ultimately raised rates during the day in response to deterioration in the bond market. The notion of “raising rates” is relative, in this case. The average prospective mortgage borrower wouldn’t think much of the mid-day increases. In fact , they would likely be seeing the same rate quote as yesterday with only a slight increase to upfront costs (or a decrease to lender credit). This is typically the case for mortgages. It takes some serious drama in the bond market for rates to move in an alarming way, and that sort of drama has been in short supply for months. If there
The mortgage’s Loan To Value (LTV) is a key indicator of the lender’s ability to recover on its investment should a loan default occur. The Loan To Value (LTV) is the loan amount divided by the value of the property. The higher the Loan To Value ratio, the greater the monetary risks for the lender should a default occur. Lenders use the LTV ratio in conjunction with other key performance indicators (e.g. FICO Credit Score values and Debt to Income (DTI) ratios) to determine……
Over a decade after passage of the ATR rule, many now see that regulating a borrowerâs ability to repay while not restricting credit can be a balancing act.
The post The mortgage industry should build ATR rule governance appeared first on HousingWire.
If you have credit issues, don’t worry. There are things you can do to rebuild your credit history. Credit builder loans are a great way to rebuild your payment history and improve your credit score. This article looks at how credit builder loans work and how they can help your credit score. Get Pre-Approved for […]
The post How Credit Builder Loans Work appeared first on The Lenders Network.
Youâve saved up your money, you found the perfect house, and youâre ready to buy. Now you just need a mortgage. Commercial banks may be the obvious choice, but they arenât the only option for your mortgage. Mortgage brokers, online mortgage lenders, and credit unions also originate mortgage loans. Credit unions and other non-banks are… Read More
The post Credit Union Vs. Bank Mortgage: Which Should You Choose? appeared first on Credit.com.
Mortgage paymentsÂ are generally very stable and will remain the same over many years, if not for the entire life of the mortgage. This is one of the many benefits of getting a mortgage over renting a home. But there are times whenÂ mortgage paymentsÂ do change, and if yourÂ monthly paymentÂ has recently increased, it could be down to […]
Why Did My Mortgage Payment Go Up? is a post from Pocket Your Dollars.
The middle class may be feeling the squeeze, but the upper-middle class certainly isn’t. The former cohort has shrunk from 61% of households in 1971 to just 52% now, according to the Pew Research Center. The upper-middle class, by contrast, … Continue reading →
The post Where Upper-Middle-Class People Are Moving appeared first on SmartAsset Blog.
Rather than shopping in department stores and visiting Santa at the mall, this year’s holiday season is going to look a little different. You’ll likely be spending more time with your closest loved ones and exchanging gifts you ordered online….
The post Holiday Spending Statistics for 2020 appeared first on MintLife Blog.
I've received several questions from Money Girl podcast listeners about paying off credit card debt. It's a fundamental goal because carrying card balances come with high interest, a waste of your financial resources. Instead of paying money to card companies, it's time to use it to build wealth for yourself.
7 Strategies to Pay Off Credit Card Debt Faster
1. Stop making new card charges
If you're carrying card balances from month-to-month, it's essential to understand what it costs you. As interest accrues, it can double or triple the original cost of a charged item, depending on how long it takes you to pay off.
The first step to improving any area of your life is to acknowledge your mistakes, and financing a lifestyle you can't afford using a credit card is a biggie. So, stop making new charges until you take control of your cards and can pay them off in full each month.
As interest accrues, it can double or triple the original cost of a charged item, depending on how long it takes you to pay off.
Yes, reining in your card spending will probably require sacrifices. Consider ways to earn extra income, such as starting a side gig, finding a better-paying job, or selling your unused stuff. Also, look for ways to cut costs by downsizing your home, vehicle, memberships, or unnecessary expenses.
2. Consider your big financial picture
Before you decide to pay off credit card debt aggressively, look at the "big picture" of your financial life. Consider any other debts or obligations you should prioritize, such as a tax delinquency, legal judgment, or unpaid child support. The next debts to pay off are those already in default or turned over to a collection agency.
In many cases, not having a cash reserve is why people get into credit card debt in the first place.
Assuming you don't have any debts in default, focus your attention on your emergency fund … or lack of one! I recommend maintaining a minimum of six months' worth of your living expenses on hand. In many cases, not having a cash reserve is why people get into credit card debt in the first place.
3. Make more than the minimum payment
Many people who can pay more than their monthly minimum card payment don't do it. The problem is that minimums go mostly toward interest and don't reduce your balance significantly.
For example, let's assume your card charges 15% APR, you have a $5,000 balance, and you never make another purchase on the card. If your minimum payment is 4% of your card balance, it will take you 10½ years to pay off. And here's the worst part—you'd have paid almost $2,400 in interest!
4. Target debts with the highest interest rates first
Make a list of all your debts, including credit cards, lines of credit, and loans. Include your balances owed and interest rates charged. Then rank your liabilities in order of highest to lowest interest rate.
Getting rid of the highest interest debts first saves you the most.
Remember that the higher a debt's interest rate, the more it costs you in interest per dollar of debt. So, getting rid of the highest interest debts first saves you the most. Then you can use the savings to pay more on your next highest interest debt and so on.
If you have several credit cards, evaluate them the same way—tackle them in order of highest to lowest interest rate to get the most bang for your buck. And if a credit card isn't the most expensive debt you have, make it a lower priority.
In general, debts that come with a tax deduction such as mortgages, home equity lines of credit, and student loans, should be paid off last. Not only do those types of debt have relatively low interest rates, but when some or all of the interest is tax-deductible, they cost you even less on an after-tax basis.
5. Use your assets to pay off cards
If you have assets such as savings and non-retirement investments that you could use to pay down high-interest credit cards, it may make sense. Just remember that you still need a healthy cash reserve, such as six months' worth of living expenses.
If you don't have any or enough emergency money saved, don't dip into your savings to pay off credit card debt. Also, consider what you could sell—such as unused sporting goods, jewelry, or a vehicle—to raise cash and increase your financial cushion.
6. Consider using a balance transfer card
If you can’t pay off credit card debt using existing assets, consider optimizing it by moving it from higher- to lower-interest options. That won’t make your debt disappear, but it will reduce the amount of interest you pay.
Balance transfers won’t make your debt disappear, but they will reduce the amount of interest you pay.
Using a balance transfer credit card is a common way to optimize debt temporarily. You receive a promotional offer during a set period if you move debt to the account. By transferring higher-interest debt to a lower- or zero-interest card, you save money and use it to pay down the balance faster.
7. Consolidate your high-rate balances
I received a question from Sarah F., who says, “I love your podcast and turn to it for a lot of my financial questions. I have credit card debt and am wondering if it’s a good idea to get a personal loan to pay it down, or is that a scam?”
And Rachel K. says, "I love listening to your podcasts and am focused on becoming more financially fit this year. I have a couple of credit cards with high interest rates. Would it be wise for me to consolidate them to a lower interest rate? If so, will it hurt my credit?"
Depending on the terms you’re offered, using a personal loan can be an excellent way to reduce interest and get out of debt faster.
Thanks to Sarah and Rachel for your questions. Consolidating credit card debt using a personal loan is not a scam but a legitimate way to shift debt to a lower interest rate.
Having an additional loan added to your credit history helps you build credit if you make payments on time. It also works in your favor by reducing your credit utilization ratio when you reduce your credit card debt.
If you qualify for a low-rate personal loan, here are some benefits you get from debt consolidation:
- Cutting your interest expense
- Getting a fixed rate and term (such as 6% APR for 60 months with monthly payments of $600)
- Having one monthly debt payment
- Building credit
A couple of downsides of using a personal loan to consolidate debt include:
- Being tempted to continue making credit card charges
- Having potentially higher monthly loan payments (compared to minimum credit card payments)
While it may seem counterintuitive to use new debt to get out of old debt, it all comes down to the interest rate. Depending on the terms you’re offered, using a personal loan can be an excellent way to reduce interest and get out of debt faster.
What should you do after paying off a credit card?
Credit cards come with many benefits, such as purchase protection, convenience, and rewards. Don't forget that they're also powerful tools for building credit when used responsibly. If maintaining good credit is one of your goals, I recommend that you keep a paid-off card open instead of canceling it.
You don't need to carry a balance from month to month or pay interest on a credit card to build excellent credit.
To maintain or improve your credit, you must have credit accounts open in your name, and you must use them regularly. Making small purchases charges from time to time that you pay off in full and on time is enough to add positive data to your credit reports. You don't need to carry a balance from month to month or pay interest on a credit card to build excellent credit.
To learn more about building credit and getting out of debt, check out Laura’s best-selling online classes:
- Build Better Credit—The Ultimate Credit Score Repair Guide
- Get Out of Debt Fast—A Proven Plan to Stay Debt-Free Forever
Today, I have a great article written by my sister-in-law and editor, Ariel Gardner. She is sharing her travel insurance review story, and goes in-depth on the travel insurance process. I asked her to write about this because I feel like it’s not really discussed, yet there is a lot to learn! You may have […]
The post My True Travel Insurance Story â A Broken Leg & Surgery in the Dominican Republic appeared first on Making Sense Of Cents.