Are Card Loans a Disadvantage for One-Room Apartment Investment? Why Financial Institutions Look at 'How You Borrow'

In the previous article, I discussed how

financial institutions prioritize disposable income, not just annual income.

One of the factors that affects that disposable income is existing debt, such as card loans, cash advances, and auto loans.

"It's difficult to get a loan if you have a card loan."

Many of you have probably heard that before.

To conclude,



having a card loan does not automatically make it difficult to get financing.

What financial institutions are looking at is not the "existence of debt," but



"how you borrow." Having debt itself is not unusual



It is not uncommon for people to use loans associated with life events, such as auto loans or education loans. Therefore, we would not decline a loan application simply because the applicant had existing debt. What financial institutions checked were:

* Type of loan

* Purpose of the loan

* Monthly repayment amount

* Usage status

and so on.



We also checked 'what you borrowed for'


For example,

* Wedding expenses

* Correspondence education expenses for changing jobs or career advancement* Temporary medical expenses In cases where the loan was used for temporary funding needs like these, it rarely resulted in a significant negative assessment on its own.

Of course, this assumes that the repayment plan is reasonable.



What we were really looking at was 'how you borrow'



What I checked particularly closely during the screening process was the usage status.

For example,

* The loan balance is steadily decreasing with repayments

* It is a temporary use and is heading toward full repayment In cases like these, it sometimes did not become a major concern. On the other hand,

* Repeatedly borrowing, repaying, and borrowing again

* The balance repeatedly increasing and decreasing

* Long-term continuous usage

Situations like these were checked carefully, while also considering the possibility that
the funds were being used continuously for daily living expenses.





We also checked the number of loans


We checked not only the loan amount but also the number of loans.
In the screenings I was involved in, cases where card loans or cash advances were used at multiple companies often led to a cautious judgment, including the status of fund management.

Of course, the decision to grant a loan is not determined solely by the number of loans.

It is a comprehensive judgment that includes the applicant's employer, annual income, disposable income, and available assets.

Also, screening criteria vary by financial institution.



What investors should be aware of

If you are considering a loan, I recommend that you clear up any unnecessary card loans or cash advances as much as possible.

Also, even for necessary loans, it is important to create a reasonable repayment plan.

Financial institutions look at things from the perspective of

"whether this person can properly manage their debt,"

rather than just "whether this person has debt."





Summary



Having a card loan does not automatically make it difficult to get financing.

Financial institutions judge your ability to continue repayments by checking not only the type of loan and the purpose of use, but also "how you borrow and how you repay."



If you are considering a loan for one-room apartment investment, try to be conscious of not only reducing your debt to zero but also managing your debt appropriately.

Next time, I will present the topic:

"Are investment loans really a negative factor? How do financial institutions view 'assets' and 'liabilities'?"

It is often thought that "if you have an investment loan, it is difficult to get the next one." However, in actual screenings, we did not look only at the loan amount.

Based on my practical experience, I will explain how financial institutions evaluated the asset value of owned properties and the outstanding loan balance.