Everyone knows that you should have a savings account and a retirement account. Those are givens but, there are many ways that you could be hurting yourself everyday without even knowing it.
We are going to cover things that are common problems for a college graduate getting finance that aren’t commonly known.
No credit is as bad as bad credit
If you read that and thought “What?”, you are not alone. It sounds silly that poor credit is just as bad as no credit. Lenders want to know how you typically behave. A person with poor credit, such as a college graduate, may pay for their purchase, just not on time. That is less risky than someone with no credit history. If your credit isn’t established, lenders wont know if you always pay on time or if you don’t pay them back at all. To get your credit start, you can get a credit card or an unsecured loans. Both of these don’t have collateral. These aren’t like an auto loan.
Auto loan interest rates can be negotiated
Speaking of auto loans, you may be unaware that your interest rate can be adjusted. If you are at a car dealership and find the perfect car, that dealership will find financing for you. Many dealerships can add a few percentages to the loan. For instance, the bank tells the dealership that your rate is 3%. Your dealership may tell you that it is 5%. They are legally allowed to mark it up a bit. Always try to negotiate it down.
Extra payments on your mortgage make a huge difference
Always pay extra on your mortgage. A large portion of your mortgage is actually interest. Let’s take a look at a mortgage on a $250,000 home. Let’s use 4% as the interest rate. Over 30 years you will pay $429,673. That’s an additional $179,673. If you only pay $100 extra to the principal every month you will save $27,957. That is a ton of money saved.
Medical debt is just as bad as credit card debt
Even though you didn’t make an irresponsible purchase, it is still just as bad as if you make a huge purchase on a credit card and didn’t pay for it. If you ever experience this, it will seem very unfair and frustrating. If you find yourself in this situation, reach out to the medical facility to make payments before it is in collections. Many times they will work with you to make payments and it won’t hurt your credit.
Diversify your credit
Lenders want to know what types of credit you use. Are you using a bunch of credit cards? Do you have an auto loan? If you have a mortgage, this let’s lenders know that you showed a lot of proof that you were responsible to get that loan.
Making a plan for the future is something that everyone needs to do, know matter what stage of life they are in. It can be hard to make a sound plan if you do not know some things that can be secretly hurting you. Many people, not just recent grads, are shocked to hear these tips. Now that you are more financially educated, you can plan for a successful future.