Tom and Sara needed a new delivery vehicle for their business. Things were going well and they had no reason to believe they wouldn’t continue to make money. After shopping around and comparing prices, Tom found the perfect vehicle to suit their needs and Sara called their credit union and applied for a loan. But they weren’t approved.
What You Want to Hear From The Credit Department
Tom was disappointed. He really wanted that vehicle. “What do we do?”
“I don’t know,” Sara looked over their finances. “Maybe we should try to find something with a lower payment?”
But Tom was adamant. “We can afford this payment! It will be tight, but we’re only going to make more money next year. I think we should try someplace else.”
What The Credit Department Will Tell You
He took the problem to the car dealership. Their financing department asked him a few questions about their annual income and then – tadah – they were approved. Tom called his wife. “We’re approved! We got the loan!” Tom drove off the lot with the vehicle that day.
Fifteen months later, Tom and Sara were struggling to make ends meet. The new car payment they thought they could afford meant they were spending every penny that came in every month, without being able to set anything aside.
When the economy turned in 2008, Tom and Sarah saw a drop in their business. They dipped into their savings to make ends meet, but they weren’t replenishing those accounts and eventually, their savings ran out. They started charging expenses on credit cards they couldn’t pay off. Pretty soon they were in over their heads. Getting approved for that car loan had been the worst thing for them.
What You Need to Hear Has To Be In Your Best Interest
When it comes to the security of your RichLife, never go by their numbers. Just because they tell you that you can afford it – the higher payment, the second mortgage, the new loan – doesn’t mean that you should. You know what you need every month to pay the bills. You know how much to save. You know what’s important to your health and peace of mind. Being stressed-out about money is never in your best interest. Give yourself the authority over their words. Just because they tell you, “You’re approved!” doesn’t mean that you should approve.
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