Housing payments can comprise a large portion of your monthly budget, making it difficult to stay on track during times of financial hardship. Here's how you can save money on your monthly loan payments to get your finances back on track. (iStock)
An estimated 13.4 million Americans — or 6.2% of all U.S. adults — are not current on their rent or mortgage payment, according to the U.S. Census Bureau's latest Household Pulse Survey.
Among those in nonpayment are individuals who have slight or no confidence in making their next payment on time, and a third (32.9%) report that eviction or foreclosure in the next two months is likely. And to make matters worse, 12.3% of all U.S. adults expect someone in their household to experience a loss in employment income sometime in the next month, the survey found.
If you're unable to make your monthly housing payment due to financial hardship, you have options. Refinancing your mortgage or other consumer debts while interest rates are low can help you lower your monthly expenses so you can get back on track with your budget.
Visit Credible to compare interest rates on a range of financial products, from mortgage refinancing to personal loans for debt consolidation.
30-YEAR MORTGAGE RATES DIP FOR FIRST TIME IN 7 DAYS
For homeowners: Refinance your mortgage to lower your monthly payments
Your home is likely the most expensive thing you own. The average individual's mortgage debt was $208,185 in 2020, according to data from Experian. It's no surprise that a mortgage payment is one of the largest monthly expenses for most homeowners. During times of financial hardship, it can be difficult to pay any expense, especially something as large as a mortgage payment.
Fortunately, you may be able to save hundreds on your monthly mortgage payment by refinancing to a lower interest rate. Mortgage refinance rates are holding steady near record lows, which makes it a great time to refinance your mortgage and save money.
You could also consider refinancing to a longer-term mortgage, which will further spread out the total cost of your loan and lower your monthly payment even more. Keep in mind that a longer mortgage term may increase your total cost of borrowing.
Use a mortgage calculator to find out how much you can save on your monthly payment based on your loan amount, loan length and estimated interest rate. To see what kind of mortgage rates you may qualify for without affecting your credit score, get prequalified on Credible's online marketplace.
WHAT YOU NEED TO KNOW BEFORE MAKING A DOWN PAYMENT ON YOUR HOME
For renters and homeowners: Consider refinancing other debts
Mortgage refinancing is a reliable way to lower your monthly housing payment but this option isn't available to renters. However, whether you own your home or rent, you may be able to refinance other debts to make it easier to afford your monthly housing payment.
You can potentially save on your monthly loan repayment by refinancing your student loans and consolidating your credit cards.
15-YEAR MORTGAGE RATES PLUNGE TO 2.00%
Student loan refinancing
The average monthly student loan payment is nearly $400, according to Credible, but yours could be significantly higher depending on your career. The average loan payment is more than $1,700 among law school graduates and $3,500 for medical school graduates, for example.
A simple way to cut down on your monthly expenses is to refinance your student loans to a lower interest rate. Keep in mind that you should only refinance private student loans right now since refinancing federal student loans makes you ineligible for hardship forbearance, income-driven repayment and even student loan forgiveness.
Student loan refinancing rates are near record lows so you can potentially save hundreds of dollars on your monthly student loan payment. You may even be able to spread your student loans over a longer loan term, which can significantly lower your monthly payment and help you free up money in your budget to put toward housing expenses.
See how much you can save on your monthly loan payment by utilizing a student loan calculator. If student loan refinancing is right for you, be sure to shop around for the lowest possible interest rate for your situation on Credible.
WHAT IS PRIVATE MORTGAGE INSURANCE AND HOW DOES IT WORK?
Credit card consolidation
More than a quarter (28.3%) of adults live in households where it has been difficult to pay household expenses in the past week, according to the Census Bureau data. Many Americans rely on credit cards to make ends meet during times of financial hardship, but high-interest credit card debt can make a big dent in your budget and make it harder to afford necessary expenses like rent or a mortgage payment.
If you're struggling to keep up with credit card minimum monthly payments, consider consolidating your credit card debt with a personal loan. Unlike credit cards, personal loans have low, fixed interest rates, which can translate to lower monthly payments. Refinancing to a longer repayment term can help you achieve an even lower monthly payment but it will increase the total amount of interest paid.
A personal loan is a type of unsecured loan that doesn't require collateral. But to determine eligibility and interest rates, lenders rely more heavily on your financial history, such as your credit score and debt-to-income ratio (DTI). Be sure to consider fees, like origination fees, when deciding whether or not to borrow a personal loan to pay off credit cards.
You can check your estimated personal loan interest rate without impacting your credit score to see if credit card consolidation is worth it. Use a personal loan calculator to estimate your monthly payments, and get prequalified on Credible to see estimated interest rates.
HOW LONG DO NEGATIVE ITEMS STAY ON YOUR CREDIT REPORT?
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.
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