Incorporating Debt Consolidation into your Home Savings Plan
For many Americans, buying a home is an essential part of building wealth and controlling their finances. The security that comes from knowing a home is owned outright instead of being at the mercy of a landlord is a goal for so many people, but it can seem as if it’s next to impossible for young people today to achieve this. Between rising credit card balances, student loans, medical debt, and personal loans, it can be hard to find a way to qualify for a mortgage.
In order to get a mortgage in today’s credit market, it’s usually necessary to have a down payment and a good credit history. A debt consolidation loan can help with both of these goals.
By consolidating all of your revolving credit into a single loan, your credit history goes from having multiple open accounts to a single open account. That may help to improve your credit score slightly. Consolidating all of your debts into one monthly payment increases the odds that you won’t forget to make a payment. Over time, this can reduce the number of negative notations on your credit report, which will probably improve your credit score.
Your debt consolidation loan will come with a lower interest rate than your existing debt, which can lower the amount that you pay every month. In many cases, it is also possible to stretch out your payments over time, making your payment even lower. This low payment can help you to save the money you need for a down payment and moving expenses.
In order for this to work, start by making a budget that includes the amount that you must pay on all of your current loans. Then, after talking to a debt counselor, you’ll know how much you would pay on a debt consolidation loan. Make a new budget based around this number, and eliminate all of your old debts. Take the difference between the amount that you currently spend on debt repayment and the amount that you will spend on a debt consolidation loan, and direct it to your savings account.
<p data-sp-element=”content”>After a while, you’ll have enough money in your savings account that you’ll be able to start shopping for a new home. With your improved credit score, you’ll be able to qualify for a good mortgage. That’s how debt consolidation can help you own your own home.