Hit the Road Jack!

Dreaming of getting your own customized motorhome to go on tour across the country? 

Well, unless you have the cold hard cash to lay down, you will likely have to borrow from the bank, and you will need to know the 4 C’s of credit.  I’m using a motorhome as an example, but the same principals apply to a car, house or other loans.

Character

This doesn’t mean you’re the fun guy at the party.  It refers to your financial history and behaviour.  Think you can stiff your old cell phone company?  Think again. Telcos are pretty much the first ones to slap a collection and “R9” on your bureau.  Your credit score should be over 700 and may be the most important factor in getting a loan. Listen to your mother. Don’t be late on your payments. Pay your minimums.  Don’t use every cent of credit you have access to, as your TDSR (Total Debt Servicing Ratio) will be too high. Anything around 40% of your gross income is good. CLICK here to learn how to get your credit score. 

Capacity

Don’t quit your day job.  You may need the income to prove you can afford to make the loan repayments.  Make sure you have filed your taxes and have the T1General and NOA for at least 3 years available for the bank.

Capital

How much do you have saved up to back up the loan payment, just in case?  How much is in your TFSA or RRSP? (well get to those later).  Aim for about 6 months of payments.

Collateral to Secure the Loan

The bank will put a PPSA (Personal Property Security Agreement) on your motorhome to protect their interests.

photo credit: Terrence O'Brien www.triberoyal.ca used with permission

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