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Get rid of your old debt first or apply for home loan

Postby suny » 13 May 2017, 02:54

Should I invest or clear my old debts?

It’s a frequent question from people willing to buy a home, especially if you are a first time buyer. What do you think you should do if you owe money to your bank against your personal loans whether you should clear all your debts first or you buy a property-

What do you think is better?

We know it’s not easy to answer because everyone has their own reason. Most of us would think in terms of paying their debt first in order to get rid of interest. Yes, that makes common sense but you must see and decide what would be a wiser step!

Get rid of Debt or take another loan

Most of us would not give a second glance, but would nod in favor of clearing off their personal debts before doing anything in the direction of investment especially in property. However, the way the rates of the properties are going-up then you need to look at interest rate. If the property appreciates at higher rates than what you are paying as interest.

What would you do for your first home?


If you feel that getting mortgage with bad credit rating is an issue, then you should consider paying your debts and apply for home loan at the same time but only if you feel you can manage both in your present income scenario. Of course your guarantor can help you in this matter at least regarding the initial deposit issue.

So what you should do to get rid of old debt

1-The best you could do is to find out the exact amount that you owe to different financial institutes. Collect all your data and statements from each creditor and check minutely what needs your attention first. The second step is to make a budget and stick to strictly. You can decide your priorities and see what needs to stay in that list what could cut so you have more cash to repay your debt quickly.

2- Stop using your credit card, yes that’s one of the best ways if you wish to improve your credit rating at least until your 60 debt is cleared. I don’t say you should cancel your credit but keep it out of your wallet and don’t use it unless must and make your transactions through cash-only.

How to maintaining a good credit score

We all know that there are certainly things that we can do to see that our credit rating allows us to apply for loans like open credit option related accounts or keep our existing accounts open while we are not really using them.

One good option is to move your high-interest debts a lower interest rate account by switching to other bank if possible but you will have to carefully check the terms and conditions and don’t forget to read the fine print when moving your loans to lower interest offer because some of them have hidden conditions which might even effect you adversely.

Conclusion

you should know better if some special changes are going on for you, but you have to grab them. You can't even imagine that a right decision in favor of investment at this very moment could bring wonderful future prospects.
Maybe some of the best future investment opportunities are waiting for you right at this very moment when you’re worried about your old debt.

Tags- Credit, Debt, Investment, Rating, Loan, Home loan
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Re: Get rid of your old debt first or apply for home loan

Postby Happyland » 13 May 2017, 15:40

The article opens up many questions. Some of them include: what income do you expect to in the future? Where are rates headed? What is the expected rate of return on the property? How will my decision impact my credit profile? As you can see they are futuristic in nature.

Having outstanding old debt / too much debt can create a problem in terms of getting a new loan at a good rate. You don't want to take on more than you can handle; and/or, cause red flags in the eyes of lenders. In many cases a borrower's situation is different from another person so making decisions on when the borrow is personal and unique to the individual. Paying attention to your credit report and score and ensuring they are in good to excellent condition will help ensure a lower rate. Sometimes switching from higher rate cards to lower rate cards will result in lowering your credit score. I have heard that this is the case for some people because it raises a red flag on the part of financial institutions.

The rate at which property appreciates can vary. It will not always be steady, smooth, upward and predictable. There are ensuing factors both seen and unseen that can creep in and change the situation. Believe it or not a lot of people owe more for the property than what it is worth. They are underwater and found this out the hard way during the crisis. But is does not take a crisis to realize that you cannot always count on the appreciation in the value of property and hope that is exceeds the rate on the loan. When interest rates become more normalized or go even higher than historical norms, this will become more evident. Years ago rates were much higher than where they stand now. Every move you make should be well thought out before you proceed and always look to the future and not just focus on the here and now.

Which should you do? Do your due diligence and put yourself in the best position as you possiby can with the information you have.
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Re: Get rid of your old debt first or apply for home loan

Postby ken alto » 13 May 2017, 19:27

It is hard to easily make a decision on what to do first. Personally I'd research on the best performing sector and then invest the money there. Then I can use part of the profits to pay the loan. However, this is not as easy as it sound and one may end up in a more difficult situation whereby you suffer losses.
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Re: Get rid of your old debt first or apply for home loan

Postby cmoneyspinner » 13 May 2017, 19:43

suny wrote:Should I invest or clear my old debts?

It’s a frequent question from people willing to buy a home, especially if you are a first time buyer. What do you think you should do if you owe money to your bank against your personal loans whether you should clear all your debts first or you buy a property- ...


* * It depends on how much time you have. The housing market fluctuates. Certain times are good for applying for home loans. Other times are not so good. It depends on how fast you want to be in your home. 5 weeks from now or 5 years from now. Ideally, you should pay off as much debt as possible if not all of your debt. Because once you buy a house and you have to make that regular mortgage payment, it takes priority over all your other expenses.
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Re: Get rid of your old debt first or apply for home loan

Postby peachpurple » 13 May 2017, 22:17

If i have a debt for the older house,i would sell it off before i take up another loan for the new house. No point accumulating more debts
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Re: Get rid of your old debt first or apply for home loan

Postby suny » 13 May 2017, 22:58

Okay guys, I have to clear so many things and queries coming from all of you. I agree a loan is a loan and one has to repay it but there is always a way that solves your problem in a smarter way. I will keep our queries in my mind when submitting my next article. Please wait for that...
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Re: Get rid of your old debt first or apply for home loan

Postby ceci » 22 May 2017, 09:22

I have 2 loans in hand,I applied for second loan for having more cash flow and capital for an investment. I think we have to do some calculation on what's the financing cost of the loan and how much we can earn from the loan itself.

If the loan can bring more return than the cost, the loan is worth to take up,from my point of view.
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Re: Get rid of your old debt first or apply for home loan

Postby Angie10 » 22 May 2017, 10:34

If there's anything I hate, it's loans! Obviously, we all have different reasons for taking out loans, but in my opinion, the only loan that's worth the trouble is your mortgage. A few years ago, my husband found ourselves caught up in a revolving door of loans to make ends meet and the bank would talk us into consolidating as it was 'the quickest way to get rid of our debt'.

In the end we got sick of it all, saved up and paid our credit cards and loan and started from scratch. The day we did that, we were so elated, it felt like we'd won the lottery! We were broke and starting from square zero, but knowing we owed nobody a penny was the best feeling ever. To this day, we try to steer clear of any form of credit.
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Re: Get rid of your old debt first or apply for home loan

Postby Happyland » 22 May 2017, 16:47

Angie10 wrote:If there's anything I hate, it's loans! Obviously, we all have different reasons for taking out loans, but in my opinion, the only loan that's worth the trouble is your mortgage. A few years ago, my husband found ourselves caught up in a revolving door of loans to make ends meet and the bank would talk us into consolidating as it was 'the quickest way to get rid of our debt'.

In the end we got sick of it all, saved up and paid our credit cards and loan and started from scratch. The day we did that, we were so elated, it felt like we'd won the lottery! We were broke and starting from square zero, but knowing we owed nobody a penny was the best feeling ever. To this day, we try to steer clear of any form of credit.


Glad you were able to plan your way out and actually get from under the burden of debt. Debt is like walking on quick sand because no matter what step you take, it feels like you are constantly sinking. Millions of people have taken that walk and know that feeling well.
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