Walking into the bank to apply for your first mortgage or consumer loan can be downright unnerving, especially for the borrowing uninitiated. It doesn't help that financial literacy isn't a mandatory subject in high schools in Canada - this, coupled with the hoops new borrowers face to qualify, can leave many Canadians feeling they're unprepared. Making a mistake when borrowing money - especially on what could be the largest financial transaction of your lifetime - could set you back for years.
It's this knowledge gap that Planning to Borrow: A Practical Guide to Consumer Lending Practices in Canada strives to fill. Author Steve Bang aims to help the average Canadian understand consumer lending practices by providing the unique perspective of a lending officer. Whether you're a fresh faced student, a mortgage shopper, or even a financial advisor, this is sure to be a valuable resource.
Taking the Everyday Approach
The book follows rookie banker Craig, who works at the fictional "Everyday Bank". We follow Craig's journey as he learns the ropes about consumer lending products and the loan approval process. While the book is similar to a textbook - there is a list of learning objectives at the beginning - this isn't your typical dry university tome. Each chapter opens with a realistic case to gain a better understanding of the loan approval process. Readers are put in the driver’s seat as the book reviews customers' loan requests and rationalizes whether to approve or deny them. Readers will learn about ways bankers can be “creative” (while still working within the law) to approve loans.
A Behind-the-Scenes Look
Many Canadians are unaware of the five C's of credit, and that reporting agencies Equifax and TransUnion keep files on their credit histories. Bang offers a look into how credit history is documented and what borrowers can do to maximize their credit scores. For example, you should always pay your bills on time even if it means paying only the minimum. Bang urges reader to be proactive and to contact their lenders should they find themselves unable to pay even the minimum on their debt requirements; hoping the debt will disappear isn't a good solution. If you’re in a dispute about a bill, do your best to resolve the situation. Withholding the payment will only hurt your credit score, especially if the debt is sent to collections.
Home Owner Prep
It's advice that comes in handy, especially for those looking to buy a home; a good credit score can mean the difference between getting a lender's lowest mortgage rate, and paying a premium for years - often resulting in thousands of dollars saved.
The book also delves into the world of debt-service ratios such as Total Debt Service Ratios (TDS) and Gross Debt Service Ratios (GDSR) and a breakdown of how the loan approval process works, with an entire chapter dedicated to mortgages. Readers will come away with real-world knowledge on the difference between fixed and variable, open and closed mortgages, as well as ways to pay down a mortgage faster.
Equip Yourself with Knowledge
If you’re looking for a book that takes the fear out of borrowing money, Planning to Borrow is up to the job. You’ll be equipped with the financial tools you need, so you can confidently walk into your bank and be qualified at a great rate.
Do you find borrowing to be a confusing process? Tell us in a comment.
