When it comes to taking out loans, the decision to go into debt is a huge financial commitment that requires a lot of thought and planning.
For Jeff and Mark Angeles, a couple from Los Angeles, their decision to go into debt was made with love and sacrifice.
In December 2017, the two decided to take out a $100,000 loan to start a family.
“IVF is a very expensive process,” Mark Angeles told “Good Morning America.” “It can cost up to thousands of dollars. We were ready to take that challenge on.”
Their loan from SoFi was their first personal loan as a couple. While they had debt from their mortgage on their house, the loan was a major debt to take on.
So before the loan was approved, Jeff and Mark made a financial game plan factoring their annual income and monthly expenses.
“I put pen to paper and just did an Excel spreadsheet of ‘Is this something we can take on, realistically,’” said Jeff Angeles. “We knew roughly how much it would entail to do the surrogacy journey and we knew how much we needed to get things started. After some research, I think we decided to take on a personal loan to get the process jump started.”
Jeff and Mark did a test run by putting money away each month prior to receiving the loan.
“We wanted to practice and get a sense of what it felt like to put that extra money away towards a loan payment,” Mark said.
Personal finance expert Farnoosh Torabi said one of the best things you can do before taking on a loan is similar to what Jeff and Mark Angeles did, which is knowing what you will be getting yourself into.
“If you’re in the market for a loan, a great way to assess whether this is affordable is to look at that monthly payment,” said Torabi. “At the end of the month, can you make this payment comfortably -- and that means you can pay your bills on time, you can afford your monthly expenses outside of this loan, you can still save, you can still potentially contribute to retirement -- all those factors need to align.”
The planning that Jeff and Mark put in before accepting their loan paid off. Last August, the couple welcomed a baby girl named Margo into their lives.
“The idea of taking out such a big loan … I don’t think it even crossed our mind that idea even existed, that you could take out that big a loan for personal use,” said Jeff. “But when you write it out, you make a plan, you track it, you practice it -- we knew we could achieve it.”
Now, the couple is thinking about planning for baby number two. They’re also expected to pay off the loan a year early.
Before taking out a loan, consider some of Jeff and Mark’s tips below:
1. Practice putting the monthly loan payment away
Before you apply for a loan, see if you need to adjust other areas of your budget to make it a comfortable payment each month.
2. Do your research
Make sure you know the interest rate, the loan term, repayment options and the total amount due each month.
3. Try to keep personal loan close to 10% of your take-home salary (after taxes) or lower
Torabi said that you have to consider all your other expenses each month. “In order for you to really live comfortably to still afford your bills and save, I wouldn’t want to spend more than 10% of my monthly budget on another piece of outstanding debt,” she said.