Month: January 2017

When Should You Get a Mortgage Loan

Mortgages are loans placed by a borrower to buy a property that is put on lien by the lender. This allows the borrower to own a property while the property is secured against the loan as a collateral. The lender, if borrower makes the maximum payment default that has been agreed, may foreclose the property and sell it to recover the unpaid amortizations.

Mortgage loans are big responsibilities to take. That is why there is a need to ensure that a borrower is ready to take on a mortgage before taking one. A few things to look at before filling up an application to get a mortgage moving.

  • Image result for Financial StatusFinancial Status – reviewing the current financial status of the borrower if income is sufficient to support paying the amortizations and the monthly expenses that will maintain the current lifestyle. It is important that the current lifestyle be maintained so that a person has enough margin to adjust in case of unexpected events such as pregnancy or health problems that will cause expenses to increase.
  • Awareness – it is important that awareness with the current loan, its terms and auxiliary fees will help the borrower plan its approach on fulfilling the loan payment properly. Without awareness of the important details of a mortgage loan will open the borrower from mismanaging the payment and a slight unexpected change in fees that is part of the agreement can create a big adjustment for the borrower financially.
  • Security – getting a mortgage loan will be a responsibility that a borrower will deal with for long period. This period ranges from 10 years to 30 years which is likely dependent on the laws of a country. Image result for Security – getting a mortgage loanDuring the amortization years, the borrower must be secured financially to ensure that any unexpected temporary halt from a source of income will allow them to continue paying for the mortgage and at the same time pay the monthly expenses they incur. This security can be supported by establishing a security fund equivalent to 6 months of the total expenses a borrower incurs.
  • Time – choosing the timing would be a factor. All the criteria mentioned above should be in place when you decide take on a mortgage.

Remembering FAST will help you prepare and know if you are ready to get a mortgage. Nothing helps achieve in managing big responsibilities better than planning.

When Should You Get a Credit Card

Credit card has been a powerful tool in the finance world.

It allows cash transfers and spending to happen out of convenience for both the cardholder and merchant. Credit is given a cardholder where a credit card issuer holds a promise from the cardholder to pay on a later date.

BDO credit cards can either make or break a cardholder. It can create a borrower with good credit standing and build a credit score that can grant well needed loans. Or it can put a borrower in debt too deep to dig out from.

It is important that we know how to manage owning a credit card and knowing when we are ready to get one. Here are some points that can be considered:

  • Image result for incomeIncome – make sure you have a source of income to support payments. Using your credit card often can lead to a regular payment scheme on your card especially when you put some of your bills on autopay/auto-charge against your card. Your income must be able to support the payments on top of your monthly expenses. In special cases, you will be revolving your credit where a budget will need to be allocated as part of your monthly expenses. These are instances where a cardholder is building their credit score.
  • Credit Limit – make sure that your credit limit is less than the monthly income you receive, at most 50% of what you get out of your salary. This ensures your ability to liquidate the entire debt in cases there is a need to liquidate. Credit card issuer will usually keep increasing your credit line without checking how much you earn once you have received your card. As long as you are paying your debt and avoiding any default, credit card companies will not be reluctant to increase your limit. It is never a problem having a credit limit higher than what you are earning as long as you manage your debt properly. When you slowly feel the burden of paying off your debt, you should start liquidating what you can.
  • Related imageAbility to Pay – if you are a prospective cardholder, it is essentially important to check that you can pay your monthly expenses regularly and on time. Credit card issuer are very strict when it comes to credit card debt. A default can cause your charges to grow and eventually become too big to manage.

Credit cards are becoming a necessity and having more importance compared to previous years. It is quite necessary to be responsible in managing them.