Advertising
Advertising

6 Ways to Make Sure You Get the Loan You Need

6 Ways to Make Sure You Get the Loan You Need

Remember in grade school when your teachers would warn you about your “permanent record?” At some point, you most likely figured out that was just a scare tactic to keep you in line until you graduated high school.

Once you entered the “real world,” you were soon introduced to another permanent record of sorts: your credit score. However, unlike the enigmatic permanent record of your schoolyard days, your credit score does, in fact, exist, and absolutely will affect the rest of your life in one way or another.

Advertising

So how do you keep it in good standing and ensure that you’re never denied from taking out a car or home equity loan?

Check your credit score often

If you’re gearing up for a large purchase that will depend on your ability to receive a loan, you should keep up-to-date with your credit score on a monthly basis. There are many ways to check your credit or CIBIL score for free, or you might opt for a more in-depth report that will usually come with a fee. While it’s a good idea to keep track of your credit score even if you’re not in the market for a new car or home, you shouldn’t obsess over it; it won’t change more than once a month. Focus less on your actual score, and more on improving it as best you can.

Advertising

Keep credit balances low

A lot of people fall into the trap of overspending using their credit cards simply because they can. This sort of irresponsible behavior can lead to missed payments, increased interest rates, and decreased credit scores. On the other hand, using your credit cards only for expenses that will immediately be paid off will show creditors that you are responsible with borrowed money, and they’ll be more likely to offer a loan in the exact amount you’ve asked for. A good rule of thumb is to keep your balances under 30% of your maximum; this shows lenders you have restraint, and will also give you some wiggle room if an emergency arises.

Pay your balances on time

While it’s pretty obvious that letting your bills go unpaid will result in a low credit score, it needs be said that late means late. It doesn’t matter if you’re a day late, or 29 days late: if you’re late with a payment, it’ll immediately be reflected on your credit score. Though it’s recommended that you pay much more than the monthly minimum, you should always pay at least that every single month. This goes back to the last point: if you’re unable to pay off your debt, you shouldn’t have made the purchase in the first place.

Advertising

Take care of small debts

As should be clear by now, credits and loans should only be used to make purchases that you’ll be able to pay off in the near future. You should never use a credit card simply because you don’t feel like “actually” paying money out of your pocket at that very moment. If you run into a jam and absolutely must use a credit card for a purchase while you’re out, make it a point to transfer money over to pay off your debt the first chance you get. You don’t want to be late on a small $30 payment because you forgot about it later in the month.

Similarly, don’t spread out these small debts over multiple credit cards. Keep your debts focused into one or two accounts, and close out the rest. There’s no need to tempt yourself with five different credit cards with no balance. Remember: the limit on your card does not represent money you actually own, but it could represent money you owe.

Advertising

Flaunt your good standing

It’s possible to request that certain loans be removed from your credit history once they are paid off. However, doing so will usually end up doing more harm than good to your ability to receive a loan. Say you’ve paid off a car loan in full at some point in the past. You made the monthly payments on time, and even paid it off quicker than you had planned. Why would you want to hide this? You want potential lenders to see that you can take out a loan and repay it responsibly. The only time you’d want to hide an account is if it’s in bad standing; of course, getting this history off your report won’t be nearly as easy.

Don’t give out more information than is reported

Credit scores exist for a reason: they give lenders a ballpark idea of how trustworthy you’ll be with their money. If lenders operated on the information given to them by potential borrowers…well, I’m sure you know what would happen. If your credit score comes back lower than expected, don’t make excuses. Everyone has a sob story to tell, so it won’t help your cause explaining that you broke your leg last year and couldn’t work, or you lost everything in a flood and needed to max out your credit cards. Your lender might feel for you on a personal level, but when it comes to business they’ll have to deny you the loan based solely on your low score.

On the other hand, if your score comes back better than expected, keep your mouth shut! You’re right where you want to be, but anything you say has the potential to be misconstrued. Save the happy dance for your living room after you’ve signed the loan papers.

Featured photo credit: JJ / Piggy bank full of dirty coins / Flickr via farm4.staticflickr.com

More by this author

Matt Duczeminski

A passionate writer who shares lifestlye tips on Lifehack

12 Self-Destructive Habits to Eliminate for a Positive Life 7 Public Speaking Techniques To Help Connect With Your Audience 20 Little Signs You’ve Found The One 8 Signs of a Man Who Will Never Ever Stop Loving You 8 Things To Remember When Dating Someone With A Guarded Heart

Trending in Money

1 The Definitive Guide to Get out of Debt Fast (and Forever) 2 25 Easy Tips on How to Save Money Fast 3 What Is a Good Credit Score (And How to Get One) 4 9 Millionaire Success Habits That Will Inspire Your Life 5 10 Reasons Why Following Your Passion Is More Important Than Money

Read Next

Advertising
Advertising
Advertising

Last Updated on July 10, 2020

The Definitive Guide to Get out of Debt Fast (and Forever)

The Definitive Guide to Get out of Debt Fast (and Forever)

Debt can feel crushing, like a weight that is always weighing you down. Looking at those numbers, it can feel as if you’ll never get out from under it. However, if you really want to learn how to get out of debt, it is possible with a great deal of focus and self-control.

Getting out of debt isn’t impossible. Like any big goal, all that it takes is an action plan to identify where you are and creating a plan to zero out your debt.

Identifying All of Your Debts

The first part of paying off your debt is getting a complete picture of what you owe. When you have everything written out in front of you, it makes it much easier to create an action plan. Depending on how much you owe, it might also help you realize it’s not as bad you might have originally thought.

Here’s how you can get started identifying your debts:

1. Own Your Debt

Before you start identifying all of your debts, take a moment to process that you have debt but want to get out of it.

Forgive yourself for any past mistakes, missed payments, or overspending. It might be painful to accept how much debt you have at first, but you must own it.

2. Make a Debt Tracker

It’s astonishing how few people ever created a tracker to understand their total debts. Most likely, it comes from not wanting to accept the guilt of having debt, but, if avoided, it can make it nearly impossible to get out of debt.

Open up a new Google or Microsoft Excel sheet and list out all of your debts. Start with the name of the creditor, interest rates, total balance, loan term length (if any), and the minimum amount due each payment. This will include student loans, credit cards, and any other type of debt owed.

3. Get Your Debt Number

Once you’ve made your debt tracker and taken the other steps, identify your total payoff number. This is crucial, as you will have a starting point and a clear goal that you are trying to achieve.

Prioritizing Your Debts

All debt is not created equal. It’s imperative to understand that there are different types of debt.

Advertising

1. Understand Bad and Good Debts

Bad debts are usually paying for things you want instead of always need. While there might be some emergencies that max out your credit cards, often times it’s excessive spending[1].

There are three main types of bad debt:

  • Credit Card Debt: The average American household owes over $16,000 in credit card debt!
  • Auto Loan Debt: According to CNBC , the average auto loan in the US is $30,032!
  • Consumer Loan Debt: Consumer loan debt isn’t as common as credit card and auto loan debt, but it’s still considered bad as interest rates are usually between 10-28%.

Good debt is identified as investments in your future. Here are three common types of good debt:

  • Student Loan Debt
  • Mortgage Loan
  • Business Loans

2. Decide Which Debt to Pay off First

Once you know each type of debt and their interest rates, you can begin to pay off debt quickly.

Focus on paying off bad debt first, regardless of if it is a credit card or auto loan. Start by paying off the loan with the highest interest rate first.

If you have several credit cards with different interest rates, you want to focus on the one with a higher APR. You will actually save more money by eliminating the card with the highest interest rate.

3. Don’t Pay the Minimum Amount

Paying the minimum amount digs you into a hole as interest rates will offset your payment. Even a small amount more than the minimum can help you pay off debt much faster.

Removing Obstacles to Pay off Debt Quickly

Creating a debt tracker and prioritizing a plan is simple, but avoiding temptation can be difficult.

1. Set a Reminder to Track Your Debt

“If you can’t measure it you can’t manage it.” -Peter Drucker

It’s so important to track your debt to ensure that you get it paid off quickly. Similar to working out and measuring your results, you need to track your debt constantly. Start with a weekly reminder, where you sign on and log your updated number. Did you increase, decrease, or stay the same?

Advertising

Regularly tracking your student loan balance can be incredibly motivating, as well. You will get a huge confidence boost each time you see your total debt amount decreases.

Set weekly and monthly goals so you can have short term wins and keep the momentum going.

2. Hide Your Credit Cards

If your biggest debt is credit cards, you need to eliminate temptation and remove them from your wallet.

Some people have gone to extreme measures by freezing their credit cards. Why? This would create an ice block around your card, which would require you to chip away at it slowly. This will give you time to think if it’s the best idea to buy that thing you’re about to buy.

3. Automate Everything

Willpower can be a huge downfall to paying off your debt. By automating your bills each month, you will ensure that willpower isn’t involved.

4. Plan Ahead

Getting out of debt will require some sacrifices, but with enough planning, you can make it work.

For example, if you know that you have a friend’s birthday or family dinner coming up, plan ahead for the costs. Whether you need to cut back on spending the week before, pick up a side job, or meet them after dinner, do what is needed.

5. Live Cheaply

The only way to get out of debt is to make some sacrifices on your spending habits. Find ways to save money each month so you can apply that amount to your outstanding debts. Here are some ways to save money each month:

  • Live with roommates
  • Cook dinners and prepare lunches for work instead of eating out
  • Cut cable and choose Netflix or Amazon Prime
  • Take public transit or bike to work

Finding the Lowest Interest Rates

The higher your interest rates, the harder (and longer) it will take you to pay off any debt.

If possible, you want to find ways to lower your interest rates to help get out of debt quickly. Here’s how you can get started:

Advertising

1. Maintain a High Credit Score

Your credit score will have a large impact on your ability to refinance your loans and receive a lower interest rate. If you have a low credit score, it’s unlikely you will be able to refinance your loans. Use these credit tips to increase and maintain an excellent score:

  • Never miss a payment
  • Don’t exceed 30% of your credit limit
  • Don’t sign up for more than one card at once
  • Limit hard inquires, like auto-loans and new credit cards
  • Monitor frequently with free credit-tracking software

2. Find Balance Transfer Offers

Start by opening a free account on credit.com. Credit.com offers you the chance to open a free account and see what type of balance transfer offers you can receive. Some of your existing credit cards might already have 0% or lower APR balance transfer offers available.

Contact each of your credit card providers to ask about lowering your rate for a one-time balance transfer offer[2].

If you do take advantage of this option, make sure that you use a balance transfer and not a cash advance. Cash advances have a ton of high interest fees (15-25%, depending on your credit card) and will only compound your debt problem.

How to Get Rid of Debt Forever

Setting up a plan, removing temptations, and getting the lowest interest rates is the first step to get out of debt.

1. Keep Monitoring and Adjusting

Once you have a plan, don’t get comfortable. Track your debt payoff plan and make the necessary adjustments when needed.

Monitor your credit scores with a free site like CreditKarma. The higher your credit score climbs, the more likely you will be to secure a new, lower-interest loan.

2. Earn More Money

There are only so many ways to save money. Instead of clipping another coupon or making sacrifices for your morning coffee, find ways to earn more money!

Think about it…it is much easier to find ways to earn an extra $1,000 per month than find $1,000 to cut from your budget.

Here are some examples of ways to earn more money:

Advertising

Talk to Your Boss

Have a conversation with your boss about current salary and/or commission rates. If you’re not satisfied or want a change, don’t be afraid to look around at other positions. Some of them might even have a student loan debt reimbursement plan!

Start a Side Hustle

This could be coaching students on the weekends, driving for Uber, or taking paid online surveys. There are tons of ways to make money outside your 9-5. Now that you have a clear plan to pay off your debts, you’ll be more motivated than ever to figure out creative new ways to earn money.

Build an Online Business

There are so many websites and blogs that earn money from ads, affiliates, and other online products. Find your niche and get started.

3. Celebrate Your Wins

As you progress in your debt payoff journey, don’t forget to celebrate your wins. You need to always reward yourself for the hard work and discipline that is required to get out of debt.

While you shouldn’t celebrate so big that it increases debt, make sure to factor in little rewards to keep you motivated.

4. Set New Financial Goals

Eventually, with a plan and these steps, you can rid yourself of your debt. Once you do, make sure to celebrate your monumental achievement, but don’t stop there.

Now, you can focus on acquiring wealth and increasing your net worth. Set new financial goals so you have a new target to aim toward. Here’s how to set financial goals and actually meet them.

These could be anything now that you are debt free! Think about where you want to travel, buying your first home, or saving for your future retirement. Just like before, make sure that your goals are specific, measurable, and achievable.

Conclusion

Congrats, you can now set a plan in motion to finally pay off your debt quickly (and hopefully forever)!

Remember, if you want to get out of debt quickly, it’s not always easy. Just like any big goal, there will be sacrifices, challenges, and problems to overcome.

More Tips on Getting out of Debt

Featured photo credit: Pepi Stojanovski via unsplash.com

Reference

Read Next