Save for a Deposit – Buying a car or home can be quite expensive. For most people, this means applying for finance from a lending institution like a bank. One of the easiest ways to lower the total cost of the loan is by saving for a deposit. A deposit is the contribution you make towards the purchase of a house or car. Your chances of securing a loan are higher if you can put down a deposit of 10% to 20%. You may also get a lower interest rate as a result.
How to save for a deposit
Remember that the sooner you start saving, the better. You can save a considerable amount by putting aside at least 15% of your monthly income after paying off your expenses. Calculate how much you can afford to borrow, given your current income, debt and other expenses. Then work out how much money you can afford to put aside.
Calculate the deposit amount as a percentage of the value of the asset. You should aim for at least 10%. Aiming for 20% or more is likely to get you to qualify for a lower interest rate. Calculate how much you will be likely to pay towards your bond or car loan. Keep in mind that this amount includes home or car loan instalments, insurance premiums, taxes and maintenance costs (for a home loan.) This will help you budget for the pressure that home or car ownership will create. You’ll be able to save for a deposit when you have a better idea of how much you’ll be paying in total.
Consider a savings account with a high interest rate. You could also save your money in a money market fund, which requires you to place a minimum deposit initially. This option may be more favourable as you can withdraw any amount of money without penalty. These savings options are likely to make it easier for you to save for a deposit and secure a loan.