There is a standard myth about California and Californians that still persists today – that we’re on the fringe of conservative America, and we take fly-by-night chances with all aspects of life, and this sometimes includes how we borrow money. This is all poppy cock. Californians in general are just as frugal and financially responsible as Americans from any State you care to mention. I was born and raised in California, and my family has as long history of borrowing money frugally, and keeping our eyes on the interest rates and the state of the market (and the Union). Below is my quick tip on borrowing money the right way.
There aren’t too many people who go through life without borrowing money. And, of course, there are pros and cons. The advantages of borrowing are that we often borrow money to make money, such as for investment purposes; and, it allows us to enjoy things while we earn the money to pay for them, such as buying a home or car. The disadvantage of borrowing is that it adds considerably to the cost of whatever it is we are borrowing for.
Although there are many guidelines bandied about as to how much a person should or should not borrow, there is really only one that has universal application: don’t borrow money that you can’t afford to repay when it is due. Even at that, there is a right and wrong way to borrow.
One of the first rules of borrowing is to shop around. A difference of half a percentage point can meet a lot of money over the life of a loan. Most Californians still have the mistaken impression that all banks, trust companies and other lending institutions are alike, offering the same services at the same rates with the same criteria for granting loans. Yet anyone who shops for a loan quickly discovers that while lenders are similar, rates do differ, as to lending limits and criteria for granting loans. And deed, these can also vary among branches of the same institution.
It’s a recognized fact of banking, for example, just how much manager discretion varies, as does their willingness to take risks. Go to where the banks are hungry. You often have a better chance of getting what you want by going to a new branch in the suburbs than to an institution’s main branch. Even so, your goal is to get an institution to lend you the money you really need. The first step in achieving this is to know what the lending institution will ask for, so you won’t be caught off guard.
Be prepared, when walking into any lending institution, to offer specific and detailed information about your income, debts and monthly payments. Of equal importance, you should know the current value of your home, car, insurance, investment portfolio and any other assets. Also prepare an up-to-date list of your liabilities.
Even if you owe a lot of money at the moment, lenders are usually impressed when applicants walk in with a brief personal statement in their hands. This in it’s self will often make the difference in marginal cases. Any lending institution will want a loan application form filled out either by you or the interviewer. This usually consists of a personal statement listing income, debts and monthly payments, assets and liabilities and employment history. You will also be asked to sign a form giving the lender authority to make inquiries about you to a credit bureau. Borrowers are often unaware as to how much weight is given stable employment. An employment history of five to 10 years with one company often makes the difference, but
obviously not always. A person who switches jobs to gain income, added responsibility, or both, is unlikely to be rejected for this reason. Similarly, a stable residency is a good sign that you’re not apt to skip town without paying back a loan. Lenders also like to know about a spouse’s income and generally want the spouse’s guarantee.
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A LOAN CALCULATOR FOR CRUNCHING YOUR NUMBERS IS BELOW; Enter your loan amount, how many years, the interest rate, and payment frequency (14 for biweekly, 30 for monthly, 7 for weekly. Very helpful so you know exactly what the loan will cost you in interest payments and you will know the total COB (cost of borrowing).
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