Credit Card Debt Is Deterring Home Buyers. Here's How to Pay Yours Off Quickly
KEY POINTS
- A recent survey reveals that credit card debt is a major factor in buying -- or not buying -- a home.
- If you have a balance on your credit cards, there are steps you can take to eliminate it sooner rather than later.
Are credit card balances stopping you from becoming a homeowner?
Buying a home is a huge undertaking -- and one that requires a significant financial investment upfront in the form of a down payment. Buying a home also means committing to an ongoing mortgage payment, plus 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 hold off on buying a home until that debt is gone.
In a recent survey by Rocket Homes, 46% of first-time buyers say credit card debt has hindered their home purchasing efforts a lot, while 36% say it's hindered them moderately or a little. Here are three steps you can take to rid yourself of credit card debt -- and move forward with your dreams of purchasing a place of your own.
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1. Get a side job to boost your income
If you owe money on your credit cards, there's probably a reason for it. After all, if you had the funds on hand to pay off 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 earnings from it won't be allocated to existing bills from the start, since that money will be extra. You should be able to use your added income to chip away at your credit card debt. And if you earn enough money on the side, that debt could be gone quickly.
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 over to a new card with a 0% introductory APR.
Of course, a balance transfer isn't an option you're guaranteed to be able to take advantage of. 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 make your debt cheaper to pay off
A personal loan lets you borrow money for any purpose, and you'll generally pay a lot less interest on a personal loan than you will on a credit card. It could pay to take out a personal loan that's equal to your total credit card debt, pay your cards off with it, and then chip away at your personal loan with its less expensive interest rate.
When you owe money on your credit cards, taking on more debt in the form of a mortgage may seem daunting. And having a large amount of credit card debt could easily be a deterrent to getting a mortgage in the first place.
If you're serious about wanting to purchase a home, do your part to free up more money for debt payoff purposes, and see if you can consolidate your debt in a manner that makes it more affordable. Doing so could be your ticket to fulfilling a major goal, while improving your financial picture.
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