How to Validate Your Debt Obligations.
List Them Out
Having good debt records is essential for many reasons: proving eligibility for student grants, becoming eligible for medical cost discounts, and applying for home or commercial loans.
First, make a list of all of your debts. This includes consumer credit such as vehicle or boat loans, credit cards, and unsecured or secured loans from banks. Bank statements and loan statements are the usual means of proof for these debts. You may also have to provide the actual promissory note, so keep that with the bank statements.
Another category of debts would be commercial loans. These include small business loans for equipment or operating capital, and real estate loans. While bank statements are preferred to show this debt, if the loan is new, the actual loan document is fine, too.
Payday loans can be validated only by the promissory documents provided by the lender. This is also true of any other short term, unsecured or secured loans.
Don’t Forget the Unusual Debts
People sometimes forget about obligations which do not have a bank statement. Such debts include IRS payments, medical debts, and child support payments. Keep a few copies of the most recent correspondence from these federal, state, or medical institutions to show where your salary is obligated to go. Always keep the most recent copies. If a payment is in negotiation, keep a copy of the correspondence to show interested parties.
Student loans are a bit more tricky. Often a coupon book will arrive, but these are useless for debt validation. Only the promissory notes are eligible, and you need to keep those organized. They are almost always impossible to get replaced, so keep them safe.
Personal loans, such as ones from your aunt or grandparent need to be listed and are documented with the promissory note. A ledger can document the payments, but here backup cancelled checks, receipts or personal bank statements will be essential to prove the transactions. Notarized statements may also be required from the loan holder in the event of any missing documents.
Useful Obligations
Many loans do not require proof of debt to a 401k or 403b or on a life insurance policy. However, when trying to get a student grant or other type of assistance, showing these loans might be to your advantage. Here both the account statements and the promissory note may be required, so keep them together and safe.
Plan that almost anyone reviewing your debt obligations will likely request personal bank and brokerage statements, too. They are not only looking to verify your income, but also regular payments for your debts. Most require three to six months worth of statements.
Just remember to never falsify any debt obligations to either your favor or detriment. This is fraud and can be prosecuted. Just bear in mind that managing your debt obligations requires good record keeping and keeping organized. Become debt-free so you won’t have to manage all the paperwork forever.
