5 Money Tips To Share With Your Borrowers

Debt is a fact of American life, but if you share these money smart tips with your mortgage borrowers you can help them successfully manage it. According to the New York Federal Reserve, the collective household debt in the United States (which includes home loans, auto loans, and credit card debt) is about $12.75 trillion. That may seem like a staggering number, but there are plenty of ways for families to tackle debt that may not be obvious at first.

As a mortgage loan officer, you’re uniquely positioned to help your mortgage borrowers manage or eliminate their debt. Use the 5 tips below to set your borrowers on the path towards a debt-free future:

Automation takes all the thinking out of debt payment, because the money automatically debits from their account. This makes it harder to overspend, because the money is disbursed immediately. There are several ways to automate – and if they’re already a customer of your bank, you can help them set this up right away!

For one, they can use the “Modern-Day Envelope System.” Help them set auto drafts from their main checking account into multiple “savings” accounts. Give each account a title like travel, credit card debt, and utilities—then advise them to only pay bills from the titled accounts. It’s the digital equivalent of putting money into different envelopes for different purposes!

You can also help them automate their financial life by using mobile apps that automatically deposit money into their savings account, so they don’t even realize it’s gone. They can use money from this stash to pay extra on debts once a month.

KEEP READING: 5 Mortgage Lending Strategies to Help Your Customers

Never forget the power of psychology in finances. Being motivated is a key part of being successful at paying down debt, so helping your borrower get those quick wins is crucial. Advise your mortgage borrowers to pay the minimum on their other accounts, and then put any extra funds towards one account. When that account is paid off, they’ll feel a huge sense of accomplishment.

Once they pay off this smaller balance they can move to the next debt, and repeat until all the accounts are paid in full. By being rewarded with wins, they’ll be more likely to keep the progress going.

Credit card companies are smart. They use points to get you to spend more. The problem is that credit cards have some of the highest interest rates of any financial product, so if they aren’t paid down fast, they can balloon quickly.

But your mortgage borrowers can turn the tables on the credit card companies. Rather than cashing out points on a gift card or transferring the rewards balance into a bank account, many reward programs will allow points to be applied towards the credit card balance. Advising your borrowers to use this feature will considerably accelerate how fast they can pay down their debt!

YOU MIGHT LIKE THIS: Ethical Practices in Mortgage Brokering

Credit cards with lower interest rates mean that more money goes to principal when a payment is made. This saves your mortgage borrowers money on interest and slows the growth on their credit card balance. If they stop spending on the account, and keep paying their bills, they’ll pay the debt down faster on a credit card with a lower interest rate.

If they have a high balance on a card with a high interest rate, help them find zero interest balance transfer offers. Figure out how many months the offer is valid and subtract a month. Then divide their total balance into manageable monthly payments to help them pay down the debt before the offer expires. Most importantly, advise them to take the card out of their wallet so they don’t use it!

A lesser known way of paying down credit card debt is to establish a debt management plan. Your borrowers create one by working with a licensed non-profit counseling organization. These organizations contact their creditors to work out debt repayment terms, and they can usually negotiate lower interest rates and get late and over-limit fees waived. Debt management plans provide structure to consolidate debt payments. Plans typically save a lot of money and pay off debts within five years or less.

YOU MIGHT LIKE: 7 Tips for Managing Client Expectations

Pass along these expert insider tips to your mortgage borrowers to help them pay down their debt all year long.

This article was originally written by Kristen Holt and published in www.loanofficerhub.com