Being financially independent isn’t always the easiest thing. Sometimes, you need to bite the bullet and take a loan. But you should take all loans with one aim in mind: getting out of them as soon as you can. Here, we’re going to look at steps to take in order to prepare that ideal loan scenario and how to get you independent but will all the benefits the loan allows.
Know your credit situation
You should be taking the free credit report checks you get every year anyway, but it’s most important when you’re about to take a loan. You have to know your credit score and any black marks on your past in order to fit the lender’s criteria and avoid having your application rejected and you score dropped even further.
Getting a credit check is another way of improving credit, too, just like paying off credit cards. You might very well spot credit failures that aren’t actually yours, giving you the chance to dispute them and have them removed.
Work out what you can afford
Don’t just think about the short-term of the structured loan payments. Take into account how much you can afford in the long-term by calculating interest as best you can and fitting it into your yearly budget. There are affordability calculators available online for the big purchases like homes and cars that can give you a better idea of what price range you should be looking at with those expenses, too. Start with affordability as your foremost priority, not using the loan to get every single dime you can.
Get a better idea of the market
Initially, choosing loans was hard and limited essentially to whom you could find in your area. There are agencies that can help you find loans, too, most common when buying homes. But these agencies aren’t always to be trusted as often they get an extra kickback in their commission from certain lenders. Instead, scan the market yourself. Both price comparison and review sites will offer a lot more insight on an auto loan, mortgages, business loans, and credit cards than any single source. Get as informed about the decision ahead as is possible.
Know that rates can shift
What you see isn’t always what you get. The advertised interest and structures of loans can shift depending on your credit, for instance. But you also have a lot of power to change the structure of a loan, yourself.
You can, for instance, opt for a short-term rather than a long-term loan, a good option if you have the income to afford it, but risky if you’re spending too much, too much. Choosing between short-term and long-term needs a thorough look at what you can afford, once more. But you can mitigate some of that risk by saving up for a larger down payment in advance as well.
Of course, if you can’t afford to speedily pay your way out of a loan, then you need to slow down a little. Work to what you’re able to pay, not what you hope to pay. Being responsible trumps being independent.