Finance 101 – Loan Process

Are you interested in borrowing money? Join Gerber FCU President/CEO as he briefly discusses the loan approval process at a credit union.

And what we look for in order to  in a previous session we talked about credit  scores and having a positive, a good credit score,   is very, very important. both to lower your rate  and to make sure you are able to be approved.   collateral value of the item being purchased   and debt to income ratios. so let’s take most  of

Our time to talk about debt to income ratios.   more than 45 percent of all your total debts   in. so as an example, if you brought in $2,000   per month then you could have no more than $900 in total debts   to get a regular policy approval from us. now, there  are always mitigating factors and we have approved  

People who have more than a 45 debt ratio. and  that’s why you work with us and your credit union   because we are able to make exceptions to these types of things. but that would include a car loan, that   would include a credit card payment, that would  include your housing expense whether it be rent   if you’re talking about

A mortgage included in   that is going to be your principal and interest  payment, the assumed escrow for property taxes   and that number typically we want to be no more  than 20 to 25 percent as part of the overall 45 percent.   and then the others, student loan payments, car  make up the remainder of that up to 45 percent. so

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How you adjust for that is a lot of times people   will refi or refinance existing debt to lower  the payment by extending the amortization.   so they might take their mortgage from a 15-year  pay back to 30 which will lower the payment, it   might raise the rate a little bit, it will be easier  on your monthly budget, the

Only issue with that   and something to consider is, that over the life  of that loan now since you’re paying for an   additional 15 years you’re going to pay a lot  more in interest on that than if you were able   to buckle down and keep it on the shorter term.  so when you get something in the mail that says   we can

Lower your payments, well the way they’re  lowering your payments is by having you stretch   so be very wary of those types of things.   is collateral value compared to how much we’re    you’re going to buy a car, we can lend you fully   including taxes and title and all the rest of   things that need to be filed at the

Secretary of  state’s office. again, that’s somewhat dependent   credit score the more we can advance against the  purchase of the car including sometimes greater  than 100 percent of the purchase price. if you   have a lower score then we might be able to only  approve 80 or 90 percent and might require a down payment.  

So just a couple things to consider as you’re  going through the loan application process and   how we look at things. debt to income is very,  very important. no more than 45 of total debt   collateral value and how much it’s going to   how much we’re able to advance. thanks for watching!

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Transcribed from video
Finance 101 – Loan Process By Gerber Federal Credit Union