Posted in Finance, Accounting and Economics Terms, Total Reads: 240
Definition: House Poor
House Poor is a condition in which an individual falls short of the liquid money or liquid assets to meet their normal obligations. This condition of house poor arrives when an individual buys a property or a vehicle more expensive than what he can easily afford. In this situation although an individual manages to earn a decent amount of money as salary, but major chunk of it he or she needs to pay as bank installments or rentals or interest payments towards loan received from bank or other financial institutions etc.
However, there are other ways as well through which an individual may become house poor such as one spouse may stop earning due to some reason or due to occurrence of some major health issue to any of the family member. Hence, these people face difficulty in paying for their other financial obligations.
A CIBIL (Credit Information Bureau (India) Limited) score is the score awarded to various individual on the basis of their past payment history, salary etc. A CIBIL score of 750 is generally considered good. However, in the last few years in United States it has been found that the credit score of most of the people was in the range of 659 which indicates that nationwide most of the population is under debt and they need o repay the same. Hence, for further credit from the financial institutions they are comparatively less eligible. Hence, the number of people facing the house poor problem tends to become more.
The following are some of the major conditions in which the people become house poor:
• Low or almost negligible savings
• Buying too much of property
• Decrease in income due to various reasons
• Huge debt from various financial institutions or lenders
• Inability to make any repairs to the house due to huge mortgage loan