25 Sep 2017   /   0 comments

How Much Money Can I Borrow?


moneyborrowBefore taking out a loan, borrowers should ask themselves: how much money can I borrow? In reality, a lender will give you how much they think you can afford and give you a loan based on their estimations. They use formulas to estimate how much you can afford. A borrower should evaluate their finances to consider how much they can afford to pay back.

Debt-to-Income Ratios

Lenders tend to use two basic formulas when trying to figure out how much they should lend you based on your income and/or the debt you already are paying:

  • Front-end Ratio: This formula uses the percentage of your yearly gross income to make monthly payments.
  • Back-end Ratio: This is the typical debt-to-income ratio banks and lenders use. They look at the percent of income you already use to cover debts that exist like child support, car payments, other loans, and credit cards.

Types of Loans

Every loan is different based on the lender you go to. Each on determines how much to give you in a different way. Most of the time, you’ll get the money you want but the interest rate is what can hurt you.

Small Business Loan

If you’re trying to expand your business and you are considering a small business loan, make sure you understand the uses of a small business loan. It should be used to help get your business to the next level, not the next few levels. It should not be used as a substitute for income or a permanent crutch. Ask yourself these three questions:

  1. Will you make enough income from the loan to comfortably pay it back?
  2. Have you considered all your financing options?
  3. What are your goals for the next year?

Student Loans

If you’re a student or parent with a college student, there are many options that you have to choose from when it comes to college funding.

Government Funding

Your child could qualify for three types of funding from the government: grants, subsidized, and unsubsidized loans. If your child qualifies for a grant, that is free money. You won’t have to pay them back. Subsidized and unsubsidized are the most common form of government funding. These are both loans that are given through the government to you and your child, but don’t have to be paid back until 6 months after graduation.

FAFSA is the government funding agency that grants money. They will typically give between $5,500 to $12,500 in unsubsidized and subsidized loans. These varies based on the dependency claimed on the child.

Private Loans

Sometimes, if the child is a dependent of the parent, the funding given by the government may not fully pay for the tuition costs. Many private companies offer student loans to college kids with the same terms as the government loans: you don’t have to pay them back until 6 months after graduation.

Most of the time, the child doesn’t have enough credit and will need to have a parent cosign. When taking out a private loan, take out what you need. These loans will acquire interest over time, so taking out $5,000 in funding could eventually lead to you paying back $7,000 after interest.

Mortgage Loan

A mortgage loan should be discussed with a bank before you go house hunting. There are many factors to consider when you’re deciding on a mortgage. On top of the monthly payment, there are fees and other payments that need to be paid up front:

  • Mortgage fees – These include the application fees for a mortgage.
  • Earnest money – This is the initial deposit paid to the seller if your offer is accepted to show the seller your legitimacy. With multiple bids on a house, this could influence the seller.
  • Down payment – You will need a down payment to keep your mortgage at an affordable rate. These should range between 1-20% or more of the total cost of the home. Usually, banks recommend 15-20%.
  • Closing costs – Once you’ve finalized a deal, closing costs include: mortgage points, attorney fees, inspections and surveys, title insurance and title search, escrow deposit, and city recording fees.

In the end, with mortgage loans, lenders typically decide how much they think you can afford in the end. To calculate a potential mortgage rate, visit US Bank.

Car Loans

Banks base Car loans on your credit and how much of a monthly payment you can make. You can buy a $30,000 car, but think about how much more money adds up due to interest. Then, the monthly payments rise unless you have a heavy down payment. Like a mortgage, the down payment will determine how much of a loan you’ll take out.

Car loans can be a tempting loan since essentially you could buy any car you want in the world. It’ll all be about what you think you can afford after you look at your credit, and the rate you could get.

Car Title Loans with TFC Title Loans

Many of these loans are unsecured loans which use your credit history to determine how much your interest rate will be, or even how much you’ll get. With TFC Title Loans, we can help you get quick cash without having to find a specific loan for what you need.

Even if you just need a couple grand to get you back on your feet, TFC can help. We offer you between $2,500 to $50,000 based on the equity value of your car. By using your vehicle’s title as collateral, we can get you funds in as little as one business day. Sounds a lot better than waiting months to be approved, right? Contact us today to see if you qualify!

How Much Cash Can i Get?

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