According to the National Consumer Council, over 6 million families in the UK are burdened with debt. Over 80% of that debt can be attributed to loans, credit cards, and mortgages. The problem is a lack of education. More than ever, people are mismanaging their money and blaming everyone possible for their financial hardships. Take control of your financial future by understanding the impact of debt on your lifestyle including residential real estate.
How Does Debt Occur?
The most common reason why people fail to repay their debt is because of mismanaged funds. Other causes include sudden unemployment, illness, or divorce. When these events occur they often throw-off the direction and order of your life. To counteract the reduced incoming cash flow, many folks look towards credit cards to pay off household bills and expenses. As you can imagine, borrowing money you don’t have only leads to more trouble. In addition to the amount you take out, you’ll also be forced to pay the interest fee which can come with a hefty price.
Purchasing Residential Real Estate
Most people wait all their lives to own their own home where they can raise a family and enjoy the comforts of residential living. Unfortunately, if you’re name is wrapped around a mountain of debt, you might not be able to bring this dream to fruition. When lenders are deciding who to approve for loans and mortgages they take a close look at your past history. This includes all outstanding debt, purchases, and a determination of your debt-to-income ratio. In other words, what is the likelihood that you will stay current on your payments based on your cash flow.
One way to ensure you have enough funding to purchase a home is to budget. A budget will provide you with the information necessary to make a logical purchase that won’t put you further in debt.
For those already struggling to stay ahead of their debt, consolidation might be the answer to your problems. A consolidation company, like Consolidated Credit, will work with you to make a budget, track your spending habits, and eliminate your debt. In the beginning, you’ll work with the company to get a single loan to pay off all of your smaller loans. The result is just one monthly payment instead of several. As you can imagine it’s a lot easier to keep tabs on one payment instead of worrying about making several payments to different entities each month. In addition to that, they’ll also work to lower the interest rate. There are many benefits to consolidating with an unsecured loan. The biggest benefit is that there’s no property at risk. Although the interest rate may be higher than a secured loan, it might be less than what’s charged on several different card balances. So in the end, you lower your interest burden and payment.
All-in-all, learning to navigate around debt can be tricky if you aren’t educated in the ways of the world.
Article and insights provided by Elaine McPartland.