One of the fastest ways to derail your dreams of homeownership is to find yourself in the grips of crushing credit card debt.
One of the fastest ways to derail your dreams of homeownership is to find yourself in the grips of crushing credit card debt. If you are a homebuyer and you owe too much money on credit cards, you may not qualify for a mortgage loan, or you may have to pay a higher interest rate. If you are a homeowner and you owe too much money on credit cards, you may not be able to refinance to a lower interest rate. You may also find yourself strapped for cash since your monthly expenses are higher when you have credit card bills to pay.
If you’re currently saddled with credit card debt and you feel like you’ll never pay it off, don’t panic. Follow these steps and you’ll be debt-free and on your way to building wealth before you know it.
Get real with yourself.
Before you can make any changes to your financial situation, you must be honest with yourself and understand why you are in the predicament that you are in. Ask yourself why you have so much credit card debt in the first place. Were you laid off? Did you have unexpected medical bills? Those are situations that are pretty much out of your control. Or is your credit card debt the result of too many trips to the mall or the vacation that you failed to budget for? If you are in financial trouble because of your inability to maintain a budget, visit a non-profit homeownership organization where a counselor can help you to create a budget and learn how to stick with it.
Write down all of your debts.
So many people I talk to have no idea how much money they owe. Some don’t even open their bills because they don’t want to think about the debt they are in. But you have to think about the debt in order to get rid of it. Take a deep breath, open your bills, and then write down how much you owe to each creditor. It might seem scary to do that, but once you look your debt in the eye, you can go about the business of taking control over it.
Tackle debts one at a time.
When you focus on one thing at a time, you make more progress than if you’re trying to handle several tasks at once. Choose one credit card to focus on paying off first. Pay as much each month as you can on that credit card and make the minimum payments on the rest. Once that credit card is paid off, take the money you were paying on that card and put it to the next card that you’re going to focus on. There are two schools of thought about which order you should pay off your credit cards. Some say you should pay off the credit card that has the highest interest rate first because you’ll save more money in the long run. However, many people find that they have more success paying off the credit card with the smallest amount first. They feel motivated when they’re able to pay off the smallest card quickly and move on to the next one.
When it comes to getting out of credit card debt, the key to success is information. If you follow these steps, and most importantly, stop using your credit cards to buy things you don’t need, you’ll eventually become debt-free and on the road to wealth.