Considering Selling Your Home During The Pandemic? Get A Consolidation Loan Instead
The COVID-19 pandemic has caused financial stress and hardship for millions of people. With the closure of a staggering number of businesses, millions of people have found themselves without employment or with severely reduced hours.
This has caused some people to consider selling their homes as a means of keeping their heads above water. Not only is this a bad idea, but there are other alternatives that individuals should explore first - namely debt consolidation.
Why Panic Selling Is Never A Good Plan
As detailed above, in the face of financial hardship, one may be inclined to sell their largest financial asset to regain control over their finances. The idea is never a good one and is even worse when the asset in question is one’s home.
Because of the pandemic, global financial markets have taken a major hit with the Dow Jones falling nearly 35% between March and April. Although markets have recovered somewhat since then, they are still nowhere near what they were before the outbreak of the virus.
This turbulence in the market has caused many people to resort to selling them homes, leading to a significant drop in the housing market. When more homes are up for sale, the supply increases turning it into a buyers market and decreasing the overall price per home. Panic selling can be financially ruinous, especially if alternative options are not explored first.
How Debt Consolidation Can Help Prevent Panic
Anyone who has been economically affected by the pandemic may be tempted to sell their house to regain control over their finances. For reasons stated in the previous section, this is not a good idea and can prove to be financially ruinous. A much better strategy would be debt consolidation, the benefits of which are listed below.
- Lower Interest Rates: Most credit cards and many unsecured personal loans carry high-interest rates. These high rates may make it difficult to keep up with one’s payments and get out of debt. A consolidation loan can lower the average interest rate, resulting in thousands of dollars in savings
- Single Monthly Payments: Debt consolidation often combines all outstanding unsecured debt into a single monthly payment, making it easier to keep track and stay on top debt obligations
- Lower Monthly Payments: Because of the lowered interest rate, most individuals can secure a lower monthly payment than what they were previously obligated to pay
- Rebuild Credit: A lower interest rate, a consolidated monthly payment, and increased payback period are all major benefits that allow borrowers to stay on top of their payments and make some real progress repaying their debt
Other Potential Alternatives To Selling
Not everyone will qualify for a debt consolidation loan, especially if they have a low credit score. Fortunately, those who have been rejected still have a few options to explore.
Forbearance is a temporary postponement of mortgage payments that some lenders will issue during times of extreme financial turbulence. Forbearance is not debt forgiveness, it simply pushes the payment to a later debt; all postponed payments must be repaid and failure to do so can result in foreclosure.