Universally, your borrowing capacity may be used in relation to the total amount of loan or credit you are worth. Also, it can mean, the maximum individual limit applicable to you in terms of financing. Borrowing capacities usually vary from one lender to another; this may be down to the fact that there are no universal or uniform means that is used to calculate the debtor’s creditworthiness.
Other than increasing your amount applicable, it is necessary to also boost your chances of getting your financing request approved. This article will take you through some techniques and strategies you can use to improve your borrowing capacity.
Watch your credit index
You should always be in the know when it comes to your credit index. Watching the progress of your scores helps you to track your worthiness and maintain it at healthy levels. However, growth is not measured in terms of stagnancy. If your scores remain at the same levels, it only shows that you are not progressing. It also does not give the lender the confidence to give you substantial amounts of money than the previous if you had dealt business together earlier or qualify for credit with Legal Licensed Money Lender You can ask your lender to pull out your credit report for you to be aware of just where you are starting from.
Manage your debts
Personal loans and credit card balances are expensive to keep overtime. Therefore, you ought to keep yourself free of these loans to be able to build a stronger credit history to instill lender confidence in issuing financing to you or your business. So, work to reduce your high rate loan balances to make it easier for your credit index to grow. A stronger credit index would make it easy for the lenders to rate you highly hence improving your borrowing capacity.
Keep your credit card limits on the low
As your credit history grows to healthier levels, your creditworthiness also grows as well. But, it does not imply that you need to stretch your spending to the levels of your credit limits. Since, by so doing, you are telling the lender that your income is not sufficient to keep you going over a specified period of time, or you are overspending and therefore you are a debt risk since your financial obligations are not met substantively. Also, you may be communicating that, you are desperate for financing since you are unable to get alternative sources of money. Consequently, the lender will decrease your capacity and may brand you a potential red flag.
So, do not always borrow to the last coin you qualify for. In any case, you are supposed to reduce your credit card reliance and. This tells the lender you have a steady income flow hence improving the lender confidence. This is all it takes to improve your borrowing ability. If you have say two credit cards, say one with a limit of $10,000 and another with $15,000, the lender’s assumption is that you have used the money in both cards to completion hence, the total debt of $25,000. Even if the sum amount used from the cads is merely $2000. Therefore reducing your credit card limits, helps lower the lender risk factor from the employer.
Exercise good record-keeping practices
This serves to keep you up to date with any changes in your records. For instance, you need to be filing annual taxes to the taxman, without awareness, you are likely to miss out on timely returns which would affect you negatively in terms of fines. Having consistent and organized financial records is an indicator of your positive financial responsibility hence you stand a better shot at your limits being increased.
Make regular savings
In case you are intending to buy a mortgage, you are advised to make regular savings so that the lender knows you have a regular saving behavior and by extension a regular income flow. This would work in your favor since the lender may just approve an improved loan capacity because of this behavior.
Reduce your spending
Cutting on your expenditure helps greatly with your savings. Other than the fact that your lender is likely to review your expenses such as the utility bills, children’s school fees, rent, salaries, etc. cutting on expenses also helps you to increase your borrowing capacity. The logic behind this is that the lower your expenses are the better chance you have at saving or repaying back the loan. Therefore, whichever way it plays out, slashing those unreasonable expenses will still benefit you in the long run.
This helps to convince you that you can afford a higher monthly deposit in loan repayment. Therefore, if you have a way to prove that you have a certain volume of income that can qualify you for improved loan capacity, then go ahead. Increasing your income from your employer, business, or any other side hassles is allowed. So long as the extra income is legal and can be proved to be so.
Refinance your debts with a line of credit
Financial consultants advise that having a longer-term loan works way better for your creditworthiness than a short term one. Therefore, you should consolidate your unsecured short-term loans as well as credit card debts to a home loan since it has a longer-term. You are however warned that the rates of interest in the long-run are going to be higher. But if your objective is to increase your capacity for a loan, then making multiple ones into one would help you stand a better chance.
The bottom line
Splitting your expenditure with your partner will also work as well. If the objective remains to increase your borrowing power then, there are many ways of doing so including, keeping your records well, saving, reducing your spending, managing your debts, consolidating your unsecured loan balances, etc. you are however not limited to these strategies since there are many more ways you can maneuver to ensure you are successful at your goal.