|
|
| Home Loans (Index Page) |
 |
|
Mortgage Articles & Advice
How to avoid the pitfalls of creeping debt.Debs, DebtSteps.com Reducing debt usually isn't a high priority for people until
Debt Income Ratios The second step is calculating your debt income ratio. Once you know what your ratio is, you will understand just how important debt load is to your overall financial picture. Your debt income ratio is the percent of your monthly take-home pay that goes to paying debts. You calculate it by taking the amount needed to repay debts each month, including rent or mortgage, and divide by your take-home pay (your net pay after taxes). Remember, this is "Debt" ratio, so only include actual debt repayment in the calculation. Credit To Debt Ratio Just because you pay off a credit card is no reason to close your account. One little known fact about the Credit to Debt Ratio is the reverse effect it has on your credit score. If you pay off a credit card, and close the account, you are actually negatively impacting your credit score. The reason for this negative effect is in the calculation of the Credit to Debt Ratio itself. This ratio is the relationship of your debt total vs. your credit limit. You calculate it by dividing the total credit limit of all credit cards and loan accounts by the total of the actual debt (spent total). Now, if you pay off a credit card, you are reducing the actual debt, which is great, but, if you close the account, you are also dramatically reducing the credit limit you have, and usually by a higher percentage than the debt reduction. Pay Yourself First Essential to long-term financial success, and protecting your future, is paying yourself first. While this may seem easy to do, it happens to be the last thing most people do, instead of first. Debts and other financial obligations, money for entertainment, and other spending always seem to take a higher priority. All I can say is, STOP! Think about it, if you aren't worth being paid first, then who is? Always put something away in your savings, and leave it alone. It doesn't matter if it's only $5 a week, just do it! Snowball The Credit Cards Last, but not least, is making extra payments, not just the minimum payments, on your credit cards. You have probably already seen this many times, but it just can't be stressed enough. Paying just $10 extra a month on a credit card, above the minimum required payment, can cut your repayment term in half, if not more! So, squeeze out that extra payment, however small, every month, and take advantage of the compounding effect of snowballing your debt away. The Power of Financial Knowledge Remember, you don't have to be a financial whiz to understand what's going on with your credit and debt. Just a few simple calculations, and an eye on the future, will go a long way to help you succeed financially and keep your debt under control. Be safe, be smart, do the math!
Related PagesHome Improvement Loans - Save big with home improvement loans that are tax deductible - Use an equity loan, line of credit, or a cash-out refinancing. Mortgage Brokers - Shop these top lenders for comparison quotes. Credit History and Approval - How to get a free credit report - Quick fixes to qualify for a better rate. Down Payment Leverage - Avoid PMI with a two-loan strategy. How to grow your equity faster. Online Lenders - Tips on evaluating online lenders and their offerings. Refinance- Tips on when refinancing is the right decision - How to avoid paying points and other lender fees. Home Loan Online - Discover the best ways to get the lowest rates - Links for checking current rates. Real Estate Settlement Procedures - Your rights under the Real Estate Settlement Procedures Act - What protections you are entitled to and what needs to be disclosed to you. Private Mortgage Loans - When to use private mortgage loans as an alternative funding resource - Qualifying for a private mortgage loan is based on the property value, not your personal credit.
Loan Directory - Complete home loans directory for thousands of loan products, mortgage
companies, brokers, and lenders. Search our loan directory by keyword or by
category for complete listings of all things related to mortgages, home equity
loans, refinance, and more. In The News |
|
|
|
||
|
|
|
Copyright © 2005 - Net Sense | More Info | More Advice
| Site Map |