Christmas is coming up so it’s important to start thinking about your budget over the holiday period.
While we all love giving presents, if you’re looking at potentially applying for a home loan in the new year, it’s important that you don’t do any damage to your chances of getting finance by overspending in the next few weeks.
What we do know, is that lenders take a snapshot of your financial situation when they assess your application for finance and if you’ve been busy racking up credit card debt, it might come back to hurt you in the future.
Here are some quick tips for budgeting at Christmas.
Allocate Money Upfront
There’s a good chance that you will be spending this Christmas, so do it wisely. Make a budget and try and stick to it.
Lenders will look at your bank and credit card statements from at least a three month period, so if you’re looking to have a clean record for your loan application, it might be worth keeping the charges down.
One idea could be withdrawing cash and paying for things with physical money, that way you can allocate funds upfront. Another budgeting idea is to simply spend a fixed amount per person. That way you can allocate a pool of money and everyone gets a fair deal.
One of the big traps that a lot of people fall into is minimising the spending at Christmas, only to get sucked into all the Boxing Day and holiday sales. When you’re allocating your Christmas budget, it might be worth applying that to the entire holiday period.
Don’t overextend yourself
While any credit card debt isn’t great, the worst thing you can do is take on more credit cards.
When it comes to borrowing money, your current debt is just as important as how high your credit limits are. If things are a bit tight on your loan application, it might even be worth getting rid of your credit cards to boost your borrowing capacity.
This is tough to do if you have outstanding balances and it’s even more difficult if you can’t pay them off.
Invariably, if people have the money (or credit) at their disposal, they tend to spend it. Keep both the credit card spending down and certainly don’t take out any new cards in the coming months. Even if there are some great sales on.
Avoid Buy Now, Pay Later
These days, everyone is moving toward the buy now, pay later (BNPL) phenomenon.
While it might be convenient, you don’t want these types of payments to impact your chances of securing a loan.
While BNPL isn’t technically an application for finance, it could impact your credit score.
More importantly, a lender will make an assessment on what type of borrower you are and if you have hundreds of these types of payments coming out of your account, it won’t look that good on the application.
These days, every lender will assess your credit score and go over your bank details with a fine-tooth comb, so it is important to have things in order.
Christmas is an incredible time of year and it’s great to give to family and loved ones. Just don’t overdo it or it could cost you a lot more in the long run, when the time comes to get a loan approved.
