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What Defines The Phrase “Personal Inflation Rate”

December 12th, 2008

Understanding what a personal inflation rate is is quite simple really. Banks, lenders, and brokers alike use your personal inflation rate as a guideline when considering your loans. Every single consumer and the borrower on this planet has their own unique personal inflation rate, and it is wise for you to understand what yours is and how it affects your chances of being approved for personal financing.

Your personal inflation rate is not the biggest trigger for whether or not you get approved. Your PIR is just another factor in the equation when it comes to your approvalability. Don’t think that your personal inflation rate is the biggest factor for the banks when you are trying to get a loan of any kind. Lenders just need to know how much money you need to spend each month on the specific items you have on the go. It is just the way for the banks to judge whether or not your expenses are going to grow a monthly basis and the future. They take into account your monthly payments and your financial responsibilities everywhere else except the loan you are presently applying for.

As per the normal, your future personal financial predicament or situation will be different if you consider all of the factors that come into play on a monthly, weekly, or yearly term. Loan officers and lenders want to have a simplified idea of where you are going down the road. They can see that if you have a dozen children that you will be expected to either earn more or spend less. Of course if you have 12 children you will be certainly spending more money in the future and this is what we call a personal inflation rate – the guesstimate of all of the new costs you will incurred or going forward as your children in this case will cost you. I believe the numbers that I have heard in the past for what it cost to raise a child from birth to 18 years of age is approximately $300,000. I remember this number as being $150,000 (well at least that is what my wife remembers it to be) but of course times have changed and the spoiled little brats are costing as a hell of a lot more money (just kidding).

As you can well imagine the personal inflation rate for somebody who is older and retired and as I have children is much less. Like I have mentioned on other places on the Web, this does not mean a person with a personal ablation rate that is low is guaranteed to get approval. So many other factors weigh into the banks calculations. Your credit score is still number one factor in your past history of making payments. If you have a very high FICO score the banks may not even consider your personal inflation rate, so you don’t have to worry about. If however, you have a weak credit rating in the range of 600-620 FICO odds are the banks will look very closely at your personal inflation rate. If your credit rating is that bad your odds of getting approved are almost nil and void. I hate to be a negative Nellie but “thems the facts”.

So don’t be stressing about your personal inflation rate when you go to apply for a loan online or at your local bank. Just keep this in the back of your mind when you tell the bank you have seven dependents with hungry mouths to feed.

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