Photo (cc) by xmacex
Here’s a question I recently fielded about borrowing money to finance a nomadic lifestyle…
I am looking into borrowing money to finance a van and a cargo trailer, to the tune of about $8,000.
I already tried applying with my local credit union, and they turned me down because of liabilities-to-income ratio. I also tried asking my relatives to loan me the money with a legally binding agreement. So I am looking into social lending. However I’d rather not pay upwards of 20 percent interest over the loan term.
I know once I have the vehicle I’ll have many more job opportunities, including dump hauling, deliveries for pizza places, and being able to have more freedom. I am going to live in this van full time and use the trailer as storage and extra living space. I won’t have the overhead of a house or apartment, and I know with the Vandweller lifestyle I can go where the jobs are and be able to pay off the loan.
What are lending options for me that will have a low interest rate and flexible terms with the possibility of early repayment without penalty.
Thank you for reading this from a longtime near-daily reader of Money Talks News.
The first thing I did after reading Paul’s question was do a search for “Vandweller lifestyle.” When I first read it, I thought he was referring to a name, like “Van Helsing,” the monster-hunter from the 2004 film.
Of course, what Paul is referring to is “van dweller,” as in one who lives in a van.
Chase your dream, Paul
The day after I graduated from high school, I left my home in Atlanta and hitchhiked across the country to California. My adventure wasn’t designed to be temporary: I wanted to live as a nomad, then perhaps eventually settle down to homestead in Alaska or Australia.
After a few months of living on the road, I found the reality far less appealing than the promise. I returned home, went to college, became an accountant and, ultimately, your humble narrator.
Do I think my dreams as a 17-year-old were foolish? No. Dreams can be naive and they can be temporary, but no dreams are foolish. What’s foolish is only living once and not following your heart, as misguided as it may sometimes be.
That being said, when it comes to dreams…
Don’t ask others to finance them for you
As I was graduating from college, I developed a new dream: making millions in real estate.
Since I had no money and no credit (this was before the days they handed plastic to anyone who could fog a mirror), I turned to my parents for funding. Their answer? No thanks: That’s your dream, not ours.
So I sold the used Toyota they’d given me for graduation and used the money as a down payment for my first house. Because I needed transportation, after securing a job, I went to a credit union and got a secured loan to buy a 1957 Triumph TR-3, a car I later sold for a profit.
The lesson? Where there’s a will, there’s a way.
Paul says, “I already tried applying with my local credit union, and they turned me down because of liabilities-to-income ratio. I also tried asking my relatives to loan me the money with a legally binding agreement. So I am looking into social lending. However I’d rather not pay upwards of 20 percent interest over the loan term.”
The reason he can’t borrow money from his credit union is because he already owes too much. The reason his relatives won’t loan him the money is probably because they’re concerned about seeing it again. The reason he’d be expected to pay 20 percent interest through peer-to-peer lending is because he’s not a good risk.
If you’ve got a problem borrowing money, the solution isn’t to ask someone like me for additional resources. It’s either paying cash or making yourself a better risk. Either path will work if you work it. But remember…
Dreams and loans don’t mix
“I know once I have the vehicle I’ll have many more job opportunities, including dump hauling, deliveries for pizza places, and being able to have more freedom.”
This is the statement Paul offers as evidence he’s good for the loan. Do you see what’s wrong with it? “Being able to have more freedom” is a dream, not a repayment method.
His statement is also vague. If you’re going to seek money from other people for a business, step one is a business plan: a detailed description of what your business will do, how much it will cost, how much money it can realistically make, why it’s better than the competition, etc.
A business plan shows outside investors why they’d be crazy not to lend you money. Less obvious, but more important, it also forces you to sharpen your vision by thoroughly examining your idea.
I’ve been approached many times for money, almost invariably for a vague dream rather than a thoroughly researched and well-documented plan. I wouldn’t think of lending to someone without a plan, and neither would any serious lender.
The bottom line
Paul’s question, “What are lending options for me that will have a low interest rate and flexible terms with the possibility of early repayment without penalty?” has a simple answer. There aren’t any.
In my opinion, Paul should finance his own dream by working his butt off, doing whatever it takes for as long as it takes until he saves the money he needs.
If he insists on borrowing, however, I’d suggest he develop a business plan. There’s plenty of free online information available: The Small Business Administration is a good place to start. Having a detailed plan will make his ideas more plausible to everyone from his relatives to his credit union.
While putting his plan together, he should focus on paying down his liabilities, increasing his assets, and otherwise making himself more appealing to lenders.
Will it take time? You bet. But that’s the great thing about dreams – if they’re worth achieving, there’s no rush. They don’t fade away. Instead, they become goals and stick around until they’re realized.
Got a money-related question you’d like answered?
Drop me a line! Just make sure your question will interest other readers. In other words, don’t ask for personal or super-specific advice. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
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