A low debt to income ratio can help you qualify for better deals when purchasing or refinancing your home, but if you’re like many American’s, credit card debts may be holding you back. According to data from the Survey of Consumer Finances by the U.S. Federal Reserves, the average American household has over $5,700 in credit card debt. This debt can drag your credit score down and skyrocket your debt to income ratio up.
If you’re struggling with credit card debt, there are ways to help lower it. Three ways to save money on credit card debt include:
1. Understanding Which Card to Pay off First
2. Reaching out for help
3. Knowing The Interest Rates on Your Cards
The first step in tackling debt is fulling understanding where you stand. To get an idea of where to start on credit card debt, take a look at each card you own and the interest rate on it. A high-interest rate together with a high balance can add years and thousands of dollars to your debt. Write out each card that you have, the interest rate on each card, and the balance.
Understanding Which Card to Pay Off First
Once you have an understanding of what your debt looks like, you can decide what card to pay off first. It may be tempting to pay off all of your cards at once, but for most people that approach is unattainable. Instead, start with the card with the highest interest rate and pay extra on that balance. Once that card is paid off, move onto the card with the next highest interest rate This approach can help you save money in the long run, while enabling you to feel satisfied that you’re chipping away at the debt.
Reach Out For Help
Sometimes life can get in the way of our best-laid plans. If you feel like you can’t pay extra on your balance consider reaching out to your credit card companies. They may allow you to settle for less than the total balance (just understand that this method may impact your credit score). You can also consolidate your credit card debt to one card. By consolidating, you’ll only have one bill to worry about being on time, rather than multiple.
How a HELOC Can Help
It may surprise you to learn another resource for paying down debt can be your mortgage lender! It’s possible to borrow against the money you have made into your home and use that money to pay down debt. A HELOC typically has lower interest rates than credit cards and is another great resource to consolidate debt. Your mortgage banker can work with you to see if a HELOC would work for your family.
Debt can be overwhelming. With high-interest rates on credit cards, it can feel like you’re not making a dent on the balance. By using the tips above, you can start lifting the weight of credit card debt off your shoulders!
About Metro Detroit Mortgage Lender, Julie Krumholz
Julie Krumholz, is an Metro Detroit mortgage lender at Main Street Bank. With over 35 years in the mortgage industry, Julie’s goal is to provide the best possible mortgage experience and the most competitive rates. Julie has vast experience in FHA loans, VA Loans, USDA loans, portfolio loans, MSHDA loans and more.