There are many occasions when you may need to make a down payment to secure a loan. For instance, when you are buying a house, you will often need between 10% – 20% down in order to qualify for the mortgage. When buying a car the requirements for a down payment are less, but it is still important to have some cash available for the transaction.
No matter what kind of purchase you are going to be making, you will need to have a plan for how you are going to save up the down payment necessary to close the deal. Here are five ideas for doing just that.
Give Up a Guilty Pleasure
Do you stop for an expensive coffee on the way to work each morning? Consider giving up that habit as a small step toward saving up for a down payment. While this method isn’t going to make much of a dent in terms of saving for a home purchase, it might free up the cash you need to eventually buy a car.
After all, stopping for a $5 coffee five days per week is more than $100 that could be saved within a month. Don’t just sit on the savings either but put it in an online savings account, such as Discover Bank, to try and grow the savings.
Make It a Priority
Quite simply, you have to prioritize your down payment if you want to actually be able to accrue the cash you need to make it happen. If you put more value on things like going out to dinner or going to the movies, you will spend your money there instead. Keep the down payment savings as a main focus, and you can make progress quicker than you might expect.
Sell Off Junk
It might not seem possible to raise money for a down payment just by selling junk from around the house, but you may be surprised to find how much value there is in the clutter that you never use.
This method is great because you can clean up your home and make space while also raising money at the same time. Again, this isn’t going to help much toward buying a house, but smaller down payments can be tackled using this approach.
Take on an Extra Job
With a specific goal in mind, such as saving for a down payment, you may want to take on a second job in order to make extra money. Set an amount of money that you wish to save and then figure out how long you will need to work your second job in order to raise that money successfully.
Improve Your Credit
This is something of an ‘outside the box’ tip, but it can work. By improving your credit, you should qualify for better terms on a loan, and you might not need as much of a down payment in order to close the deal. For instance, if you can improve your debt-to-income ratio, lenders will look upon you more favorably, and the terms of your loan will become easier to negotiate. Suddenly, you may not need as much of a down payment, and you may be able to make your purchase sooner as a result.
Are you saving up for a down payment? What are you doing to save money for a down payment?
Photo courtesy of: Brett_Hondow