Lenders want proof that you can pay back the loan. If your expenses gobble up your entire paycheck, your lender will not want to add more bills to your plate, since this could increase your chances of defaulting on the loan. But what if your salary is not your only form of income?

Your assets can make you a stronger candidate for a low-interest loan, since they increase your net worth. Overall, this may make your lender more confident in your ability to honor the terms of your loan.

How Your Income, Assets and Liabilities Help

Examples of assets you may have include:

  • Cash in your bank account.
  • Investment accounts.
  • Paid properties, such as your vehicle.
  • Heirlooms or other things of value, like artwork.
  • Cars, boats and household furniture.
  • Your spouse’s income and assets.

The lender will compare your assets against your liabilities to determine your net worth. A liability is something you are responsible for, such as debt or other financial obligations. 

If you are trying to get the best rate possible on a personal loan, then it is generally better to have more assets and fewer liabilities. For most borrowers, this means having a low debt-to-income ratio.

Even if your income is relatively high, you may have trouble getting the best loan rates around if you are being forced to put a large portion of your earnings into debt payments each month.

Therefore, make sure to line up your monthly earnings with your monthly expenses, such as your living expenses, student debt and car loans. If you make more than you spend, a lender will see you have the money to pay back the loan.

Helpful tip: Although your spouse’s income and assets may make your financial situation look more favorable, your spouse’s debt and liabilities can make your situation look more negative, too. Next, find more helpful tips to keep in mind while preparing to apply for a low-interest personal loan.

By Admin