Ways to make your finances ready for big-ticket buys requiring a loan.
Big dreams often mean spending big. Houses. Cars. Education. Weddings. Dream vacations. If you’re planning to borrow to make a big-ticket dream come true, here are ways to prepare your finances.
Get your credit score as healthy as possible
Your credit score is a key factor in how much a loan will cost. The higher your score the lower interest rates lenders will offer. To see where you stand with the credit reporting agencies, use our free credit score feature.
To keep your score healthy, make all bill and loan payments on time and in full. Don’t max out lines of credit—including credit cards—and don’t apply for new credit (other than for your large purchase).
If you’re building a credit score from scratch or want to boost your score, check out these tips for improving your credit score.
Save up for a down payment
Home and car loans usually, but not always, require a down payment. As soon as you know you’re going to make a big purchase, start setting aside cash in a savings account. The larger your down payment, the less debt you’ll need to take on.
Take your time
Emotions play a big part in many purchase decisions. First, determine if the purchase is a want or a need. If it’s a want, that’s okay. Just be clear with yourself and anyone else—like a significant other—who will be involved in the purchase. Distinguishing between a want and a need will help you evaluate how much to spend.
One way to help avoid buyer’s remorse
Implementing a policy of delaying spending can help you avoid buyer’s remorse. For example, there’s a high-quality sofa that catches your eye. It’s perfect color, size and style for your home. The price: $3,000. Instead of instantly gratifying your desire for new living room seating, delay the purchase for 30 days. During a delay period like this, many people discover that what they first desired isn’t what they really want to spend their money on. If after 30 days you still desire the sofa—and can afford it—go ahead with the buy.