Buying a home is a huge undertaking – and one that requires a significant initial financial investment in the form of a down payment. Buying a home also means committing to an ongoing mortgage payment, as well as covering peripheral expenses such as 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 is gone.
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 your credit card debt and move forward with your dreams of buying your own home.
1. Get a side job to boost your income
If you owe money on your credit cards, there’s probably a reason why. After all, if you had the funds to settle your balances, you would. That’s why getting a second job could be a smart bet.
The beauty of a side job is that your income won’t be applied to existing bills from the start, because that money will be extra. You should be able to use your extra income to reduce your credit card debt. And if you make enough money on the side, that debt could disappear quickly.
2. Consolidate your debts with a balance transfer
The less interest you incur on your credit card debt, the easier it should be to pay it off. That’s why you might want to consider a balance transfer, especially if you qualify for an offer that allows you to transfer your various balances to a new card with an introductory APR of 0%.
Of course, a balance transfer is not an option that you are guaranteed to take advantage of. To qualify, you will 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 this option is on the table for you.
3. Use a personal loan to pay off your debt for less
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. It might be beneficial to take out a personal loan equal to your total credit card debt, pay off your cards with it, and then reduce your personal loan with its lower 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 large amount of credit card debt could easily be a barrier to getting a mortgage in the first place.
If you really want to buy a house, do your part to free up more money for debt repayment and see if you can consolidate your debt in a way that makes it more affordable. This could be your ticket to achieving a major goal, while improving your financial situation.
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