It’s unlikely that you’ll be able to pay for a car, home or college education on your own. In some cases, it may not be a good idea to do so even if you could. Let’s take a look at the steps that you should take to finance a big-ticket purchase without paying too much for it.
Review Your Credit Report for Errors
The loan terms that you might receive from a bank, credit union or other financial institution will depend largely on your credit score and creditworthiness. Errors on your credit report could negatively impact your credit score and ability to get a loan. Reviewing this document before applying for a loan may allow you to eliminate inaccurate information or take other steps to improve your chances of obtaining financing.
Get Quotes From Multiple Lenders
Regardless of the type of loan that you’re seeking, it is important to get quotes from at least two different lenders. Doing so can help you feel confident that you’re getting the best deal from whichever bank or credit union you choose to partner with.
If you have poor credit, shopping around may make it possible to find a financial institution that will approve your application without a cosigner or large down payment. It is important to note that private student loan companies will typically require borrowers to obtain a cosigner if they are under the age of 21.
How Much Do You Want to Put Down?
You may have heard that it’s best to put 20% down when buying a home or car. While this may help to build equity in those assets faster, it might also leave you with little money left in the bank. This could lead to significant financial hardship if you lose your job or experience a medical emergency. It could also make it harder to pay for routine or other maintenance that a home, car or another asset might need.
If you have positive equity in your current vehicle, it can be used as a down payment on the one that you want to purchase. Furthermore, mortgage products offered by the Federal Housing Administration may allow you to finance up to 96.5% of a home’s purchase price.
How Long Will You Take to Repay the Loan?
The average consumer takes about six years to repay a car loan, 12 years to repay a student loan and 30 years to repay a mortgage. However, it is generally a good idea to repay a lender as quickly as possible to reduce the amount of interest paid on the loan.
When done responsibly, borrowing money can be an effective way to improve your lifestyle or increase your net worth. A financial adviser may be able to answer any further questions that you might have acquiring a loan.