Posted on: 27 June 2019
Student loans are a major burden to most millennials, but yours shouldn't prevent you from getting a car or a home. Many times, a bank will see your loan as a massive amount of debt, especially if your loan was large and your income is low to moderate. If you plan carefully and are good with your money, then you should be able to secure a loan at a decent interest rate. Here are some of the dos and don'ts of getting your finances ready for a car or home loan when you have a student loan.
Do: Grow a savings account
The more you save and the more you can put down, the smaller the loan with less to pay back. This means that your lender will see you as less of a risk, and this increases your chances of getting a loan.
Do: Pay Bills on Time
Make sure you pay all bills on time, including ones like your utility and medical bills, before applying for a new home or car loan. You should show that you've been paying your bills on time over a long period.
Do: Establish Credit
Most lenders will not lend to you if you have no credit history at all. If you have a job or a steady income, then you should be eligible for some credit cards. If and when you get a credit card, make sure you pay it in full every month.
Do: Keep a Record of Your Gig Jobs
Often, self-employed jobs, or gig jobs, don't show up on credit reports. Make sure you keep documentation of this extra income to show the lender and give an accurate report of your debt-to-income ratio.
Taking time and looking at all your lending options can save you money and ensure that your new car or home loan doesn't become a burden.
Don't: Go Over Your Budget
Look at your budget and stick to it. Make sure you have enough not only for your current expenses but also emergencies and possible increases in other expenses.
Don't: Close Credit Accounts
If you have a credit card account that you feel that you don't need, don't close it down. The more open credit you have, the better, even if it's unused. Closing an account can actually hurt your credit rating.
You may also want to look into lowering your student loan payment amount with an income-based or gradual repayment plan to free up more income for your new home or car. Your main goal is to prove to your lender that you are a good risk and will pay back the loan on time. If you are looking for more information about financial information for millennials, then check out a millennial money blog, such as Millennial Money Minute, for advice that could help you.Share