Personal Finance Advice

Lenders take several factors into consideration when deciding whether to approve an application for a loan or not. With so many factors influencing the approval decision, it is easy for something to go wrong and an application for a loan to wind up denied. If you know ahead of time what a lender will look at with regards to your loan application, you can make sure that everything on your application is poised for you to get approved without any delays or problems. 

This is especially true for lengthy loan applications that involve a lot of information and verifying. For example, you will have to provide a lot more information for a mortgage or business loan application than you when applying for a department store credit card. It is with these lengthy loan applications that a small problem can delay the process substantially. As an example, if you are trying to get financing for a home loan for the home of your dreams before someone else puts in a bid for the same home, a problem with your application delaying the approval by a couple of days can ruin your chances of getting the house.

If you know that you will be applying for a loan in the near future -especially if it is for a major purchase- there are some things you can do to make sure your application goes through as quickly and easily as possible:

Review your credit report. This is the single most important step you can take prior to applying for a loan. It is far better to discover problems with your credit report before applying for a loan so you can take the necessary steps to fix them instead of finding out about problems from your loan officer, who will then have to deny your application or offer you a higher interest rate. Get any issues fixed before you apply for a loan.

Don’t close any accounts. You may not need (or want) some of the credit card accounts you have, but closing a bunch of accounts right before applying for a loan can result in a drop in your credit score. This is because you lose available credit and credit longevity, which are two major components of your credit score. Close the accounts after you get your loan.

Don’t open a bunch of new accounts. Lenders try to steer clear of people who appear to be on a credit rampage because it is these people who often wind up in serious financial problems or, worse yet, in bankruptcy. If you know that you are planning on applying for a large loan soon, this is not the time to go apply for a few department store cards and to get a car loan.

Don’t enroll in a debt consolidation service. You might think that utilizing a credit counseling service will look great on your credit report and will help you get your bills in order, but the truth is that while these services may be quite useful, they are not a good idea when you are preparing to apply for a loan. Most of these services will have you sign an agreement that you won’t seek out additional credit while enrolled, so applying for a loan will be a breach of contract.

Get some money into your savings account. Even if you have a great credit score, most lenders for large loans want to see some money sitting in your account. If you don’t have any cash sitting in your checking or savings account, work toward getting at least a couple of thousand dollars in your account so it does not appear as though you are living paycheck to paycheck. 

If you are simply applying for a new credit card or a small loan, you may not have to worry so much about taking all these steps in order to improve your chances of getting approved. If, on the other hand, you are readying yourself to apply for a large loan, you should do everything you can to make yourself appear more creditworthy to your potential lender.

It is amazing how some people will vigorously pursue the highest salary from a company they work for, yet when it comes to setting their own pay rate as a self-employed individual they will oftentimes accept much less money than they are actually worth.

For example, suppose a stay-at-home mom decides to start up a dog walking business. She wants to have her own business so she can continue to be home when her kids get home from school, and she loves dogs, so this is a logical step for her. Instead of doing some market research and discovering what she should actually be paid for this service, she prices her services entirely too low, or worse yet, just asks her new customers what they want to pay. She then gets really excited when she makes her first $5 for taking a dog for a forty-five minute walk in the park. She’s exhilarated because she made money on her own, but whether she is actually making enough money to justify the work is debatable. After all, if her previous employer in a corporate setting would have said something along the lines of, “I want to pay you just under $7 an hour, and by the way, I want you to walk my dogs for me,” she probably would have been insulted. In fact, she may have thought to herself, “My time is more valuable than that.”

How valuable is your time? In the instance with the mom wanting to start the dog walking business, she has to factor in several different things:

• What other things that she previously did herself will she have to pay for if her business gets busy, such as meals or house cleaning?
• How much money will it cost her to get her business started, such as marketing, leashes, and liability insurance?
• How much of her own free time is she willing to sacrifice for the new business?

Making that $5 may seem awfully empowering, but at the same time, she is probably underestimating the true value of the service she is providing. Before offering her services she needs to find out the maximum amount people already pay for these services and then build up her base of clientele who are actually willing to pay her what she is worth.

On the other hand, if her passion is walking dogs, and she derives nothing but pure joy from walking dogs throughout the day, then $5 for forty-five minutes may seem like a bargain. Most people, however, start a business in the hopes of making money while also doing something they enjoy or have a passion for. The business will probably not be successful if the owner does not charge enough for the services or does not enjoy the work to begin with.

How much is your time worth? It’s worth whatever people are willing to pay. Don’t underestimate the value of your time and efforts and don’t feel sheepish about demanding fair pay for the services you offer.

Most people encounter some time in their lives when their money situation gets a little scary and they aren’t sure if they will be able to meet all their bills at the end of the month. Sometimes this is a result of bad financial planning and sometimes this is a result of a financial emergency that could not be avoided. Regardless of the root cause of the monetary shortfall, you just have to know when you have reached a point where you aren’t going to be able to handle everything and you need to ask for help.

Pride can get in the way of asking for financial help, but sometimes people simply don’t realize that there are resources available to help when times get rough. Having money problems can feel like a really lonely problem, but the good news is that there are usually several agencies that can help you. Of course, for some people, all it takes is asking a family member or friend to lend them some money to make it through a rough patch, but if you don’t have anyone willing to give you some money (or you really don’t want to ask) then there are other resources you can turn to when you need a little help.

Keep in mind that these types of services aren’t meant to replace an income indefinitely, but they can help you during a financial crisis to make sure that there is food on the table and a roof over your head.

Utilities: Most utility companies sponsor programs for people with low income that assists these people in paying for their heat in the winter and air conditioning in the summer. You will probably have to enroll in the program and prove financial need, but this is far better than going without a utility as a result of not having money to pay your bill.

Food: Food banks are located in most major cities and are common in smaller cities as well. You may also qualify for a government program to receive a stipend for food or may be able to participate in W.I.C. if you have young children.

Medical Care: Most states have programs that are designed to help people who cannot afford to pay for health insurance or health care, especially for young children. There are other government-run programs that may be able to help you cover medical costs, and some hospitals offer grants to patients who have financial need.

Budgeting: If your problem isn’t that you don’t have enough money, but instead is that you simply don’t know how to handle the money that you do have, you should seek out a free budgeting seminar or counseling session. Check with a local credit counseling agency to find out what is available, but don’t get pressured into signing up for credit consolidation or some other program if you really don’t need it.

If you need some help to feed your family or to cover your basic expenses, don’t be afraid to seek out assistance. There are so many organizations that are willing to help; there is no reason to not look for help when you really need it.