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Tips for Moms to Get Out of Debt

If you have tried buying a home in the past, you might have heard that something mortgage lenders take into account is your credit score and profile. There are a lot of ideas as to what kind of debt is necessary to create your credit profile. However, that can often lead to debt that is nearly impossible to pay back or responsibly manage. And taking on too much debt that you can’t afford is a surefire way to have your mortgage application rejected. The good news is that there are ways to manage your financial life so you can take care of what you owe.

Paying Off Debt

Now might be a good time to start considering where you will acquire the funds to pay off each of these loans. For example, if you have a life insurance policy, consider selling that for cash. That way, you can get a larger amount to put toward the loan that has the highest interest rate. If you are thinking about selling the policy, you can review a guide on the process to be aware of the possible tax consequences.

You should start by realizing that there is a problem, so you should avoid taking on any more debt. That means putting away your credit cards and purchasing things with cash only. It is time to begin living within your means – if you can only afford it by putting it on a credit card, it means you can’t afford it at this time. To avoid the temptation to spend even more, contact each of your lenders and ask them to cap your limit to what you currently owe. Try listing out each outstanding balance with the amount and term, as well as the monthly repayment. Then you can list out the interest rate on each of them.

Creating a Budget

With a budget, you can see how much you are spending in various categories so you can free up some of your cash. Many times, you’ll have to make monthly repayments to each lender, but these are often designed to keep you paying for longer, increasing the amount of interest you owe. That means you might end up paying off one loan for several years without seeming to make a significant debt in it. That means you’ll want to start putting a bit more toward them each month.

Getting out of Debt Sooner

Making extra payments will reduce how much you need to put toward the balance each month, and that might also lower the credit utilization ratio. That means you might boost your credit score with enough extra payments. Make these a priority and try to get extra funds from wherever they are available. Even if you just get a couple of odd jobs, every little bit will count. Motivate yourself by thinking about how much closer each payment puts you toward being done. And once you have reached a milestone, whether it’s small or large, reward yourself so you keep pushing forward to the end.

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