How to Fit a Signature Loan into Your Budget
Budgeting can be tricky business on its own, but if you need a loan it can get even more confusing. Before you sign up for any loan, take some time to come up with a budget so you know what you can afford while you are shopping around. Lenders have their own algorithms to determine what you can afford, but only you know what you can truly pay each month. Before you start shopping around for a signature loan, you’ll need to take a long look at your monthly bank statements.
Assess your net income.
Gross income can’t be factored into the equation because, after taxes and healthcare, what you’re bringing home is undoubtedly less than what you officially make a year. Grab your paystubs or last year’s taxes to determine your yearly ‘net’ income (what amount actually goes into your bank account every month). This is the money you have to work with, and is, in a sense, the foundation to any relationship you’ll make with a signature loan lender.
Add up your monthly bills.
Look at your power bills during peak seasons to know what the typical maximum amount you normally spend is. Assume every month will be this much (knowing that you’ll normally have some left over). Next find your monthly obligations for these common bills.
- How much do you pay on student loan debt each month?
- How much do you spend on car payments each month?
- Rent/ mortgage?
Add everything up. These are things you can’t change, and so this money should be safely set aside each month.
Take a look at your spending habits.
How much are you spending on groceries each week? How often do you buy gas? Are you picking up a $5 coffee three times a week? Are you spending over $40 a week on impromptu lunches with coworkers?
Ask yourself what you can change and what you can’t. If you really need the loan, you might have to cut out some fluff, and your spending habits is where you’ll do it. Make your coffee at home in the morning, or politely decline your coworker’s invitations a little more often. Keep the peace but keep as much of your hard earned money in your bank account as you can.
What can be cut out?
Most people have redundancies in their life. They pay for cable and Netflix. They have coffee at home and yet still go out to Starbucks. They eat out when they have a fridge full of food.
What are you spending money on that you don’t need to be? Where could you save?
Do the math.
If you need a signature loan, look at the amount of money you naturally put away each month and the amount of money you could be putting away. If your natural savings is enough to support an additional $200 monthly payment, you’re fine. If it’s not, you might need to change your spending habits depending on the amount you need to borrow.