I had an interesting discussion the other day with my customer. For some reason he was under the impression that he earned the privilege of buying a $50,000 Armada with no down payment despite never paying any creditor whatsoever. It’s odd that this type of conversation is quite common with my customers. Furthermore, that particular customer was shocked to find out that they were declined from all of the banks that we submitted credit applications to. Simply put, because of his consistent lack of following through on a promise, he has burned his credibility to almost all of his creditors. So when you ask yourself would you loan yourself $100 and expect to get it back… and the answer is no we know that there is a significant issue. So my question is how do we get banks to say you’re approved?
Step 1: STOP SPENDING MONEY!
If you are this bad into a situation, you are leaking money and it is best to simply stop spending money that you obviously don’t have to spend. When you start spending money that you don’t have is when creditors begin to frown upon loaning you money.
Step 2: FOLLOW THE MONEY
Track the way that you are spending money. Count your income. Log it. Look at where you are spending money. If you stopped spending it, you should show a lot of money in the bank. Create a budget based on your necessary expenses. Try and figure out your daily, weekly, monthly, and annual budget. Once you figure this out, go ahead and check to see if your monthly income received is equal to or greater than your expenses. If it is not, you need to do one of two things, reduce your expenses or increase your income. Both would be better.
Step 3: BUILD A SMALL NESTEGG AND PAY OFF DEBT
Once you have some extra money every month, put away a little and use some to pay off some debt. As you are doing this, you will soon have some money for emergencies and a track record of paying some debt. It’s also in your best interest to contact your creditors and try to see if they are willing to work out something to help reduce the monthly so it doesn’t get negatively reported against your credit!
Step 4: BUILD A DOWNPAYMENT
Once you’ve built up about 3-6 months of reserve, go ahead and start building up a down payment. At this point, your goal should be anywhere from $2k-$3k. Once you reach this amount, you should be able to qualify for most types of vehicles.
Step 5: BE REALISTIC FOR YOUR FIRST VEHICLE
Remember, you need to find someone that will be willing to give you a loan… period. You may not get into your dream car right away. You will need to build up. Once you have a good track record on an auto loan, banks will be more likely to help you out when you would like to upgrade vehicles. Make sure that when you commit to payments, you need to make sure that they are less than the amount of money that you are putting aside for your down payment. If not you will find yourself unable to pay all of your creditors and will be right back in your situation. You will pay high interest, but remember that this is only temporary, as you pay down your loan and pay off other debt, you will qualify for better rates, but it does take time.
This is a pretty simply laid out plan. Most people can’t seem to follow it. Majority of people who attempt to follow this plan end up “needing” to go on a trip or “needing” to buy the cool doodad that was there. This is a process, but when you are as bad as some of the people that have come into the car store there is a long process to get them back to the point where someone will be willing to take a risk on you. If this is you, be realistic and take these steps. It will only benefit you in the long run.