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If you watch the nightly news, you’ve probably gotten the idea that banks have no money to lend or that you’ll have to jump through hoops to get financing. While that may be true at some troubled institutions, borrowing money from strong community banks like Millbury Savings generally hasn’t changed.
Millbury Savings Bank’s consumer lending team offers advice for putting yourself in the best position to be approved.
Check Your Credit.
How much debt you have and your track record in paying your bills are important indicators of whether you’ll pay back this loan. So in addition to making sure you pay your bills on time and you don’t over-extend yourself, be sure to pull your own credit report and know what’s in it. Many people have never done so, and you’d be surprised how often mistakes can appear. If errors are present, take the necessary steps to correct them at once.
You can pull one free credit report per year from each of the three credit bureaus. Use a once-a-year event, like your birthday or filing your taxes, as a reminder to review them annually. As an alternative, pull just one every four months to keep a closer eye out for potential errors.
Even if you do have credit problems, all may not be lost. Take proactive steps to fix them, though it will take time. If you owe money, contact the creditor and try to work it out. In time your credit score will improve, though it may take six months or a year.
What if you have no credit history yet? Establishing one can be done, but that also takes time. Open a department store credit card and charge on it two or three times in a six-month period, making sure to pay it off in full each time. Or, take a small collateral loan, secured against a savings account or CD, and take about a year to pay it back to establish good credit.
Know What You Can Afford.
Many folks—especially those new to borrowing—think they can afford a higher monthly payment than they really can. For example, young people in their first job may believe they can afford a $400 car payment on $2,000 of gross monthly income. But once we factor in the cost of gas, insurance, and repairs for that car, on top of income taxes and other expenses, they realize there’s just not enough to live on.
For mortgages, income-to-debt ratios exist as guidelines to help you figure out what you can afford. Generally, you should pay no more than 28% of your gross monthly income toward housing expenses, and no more than 36% of your gross monthly income toward combined house payments and other regular debt expenses, like car loans, student loans, and credit cards. Even then, you have to decide whether those parameters are something you can live with.
Establishing a long-term deposit relationship with a local community bank like Millbury Savings Bank actually can benefit you when you need to borrow. When we know you, we can work with you to find the best loan for your specific situation. The people who process and approve your loan are right here, not out-of-state, so you don’t get lost in the shuffle.
The biggest benefit? It all comes down to the personal approach. We look at the borrower’s entire situation, not just one aspect. If there’s one negative, but everything else is positive, we can take that into account. Bigger banks just don’t have the personal relationship with you to do that.