Should You Finance with a Credit Card or Simply Default On Your Mortgage?
When it comes to personal loans and finances, even the smallest payments can add up in time. If considering this, then it would be advisable for anyone to finance their mortgage payments or personal loans using a credit card instead of defaulting on it.
One of the biggest misconceptions for mortgage customers is that late fees for them will be as small as for other concepts, like paying just a couple of dollars for your garbage bill for example. Nothing could be further from the truth though, since late fees on mortgages tend to be quite higher than that. And if you start to avoid paying them, then your mortgage or personal loan late fees can increase dramatically.
A surprising number found in a research by the St. Louis Fed, states that, on average, homeowners and personal loan borrowers who are in default on their payments are currently paying between 18 percent to up to an impressive 85 percent of interest on outstanding personal loan and mortgage payments.
Where things get interesting though, is that if you compare this rates and amounts with the ones that the average consumer pays on their credit cards, you realize just how dramatically lower credo card payments can be, with rates that are around 16.75 percent at the most.
So you must be wondering: How come small monthly charges that didn’t average more than 6 percent could end up to interest amounts exceeding the ones charged for credit cards?
Late Fees Add Up in the Mid and Long Terms
The purpose of late payments is to encourage you to pay your personal loan and mortgage installments on time. Due to their nature though, a lot of people don’t consider them in the their estimations for the real cost of borrowing. Otherwise, the final debt would amount to quite a lot more than initially estimated.
Another very important difference between the fees and rates charged by mortgages, personal loans and by credit cards is that, while most interest rates are charged every year, the ones for mortgages are charged monthly instead, which can lead to high amounts of debt in as little time as just a few months. This is one of the main reasons that the average foreclosure can take as little as only 15 months nowadays.
Prevent Late Fees On Your Payments
While there is no guaranteed method that will ensure you never have a late fee, there are a few way in which you can organize your personal loans and finances to minimize your probabilities of you paying late.
– Pay Your Bills as Soon as You Get Them: This is not a law of course, but leaving your debts unpaid for days and wait until the last couple of days to take care of them can cause problems, especially if you forget to pay them.
– Try to Get Into Fewer Debts: If you start restricting your expenses and controlling the amount of debts and personal loans you acquire every month, every month you will have less and less bills to pay. This will of course, leave you with more cash at the end of the month that you can use to pay your personal loan and mortgage comfortably.
– Enroll in Automatic Payments: Many banks and lenders nowadays offer their customers the ability to have all of their periodic payments debited directly from their accounts. This ensures you are never late in your mortgage and personal loan payments while also saving you time.
Never forget that no matter how small your mortgage or personal loan late fees might seem, in the end they can amount up to a huge interest rate, a situation you can only avoid by not paying any bills late at all. However, if you think you can’t avoid it, then start considering paying those debts with your credit card, since interests for it tend to be lower.