There is a commonly held belief that lenders -- college financial aid offices, credit card companies, banks, furniture stores, mattress companies, you name it -- have some kind of superpower that gives them the ability to know what we can afford. And many people believe lenders communicate their findings to us in the form of loan approvals.

I hear from many readers who are simply flabbergasted that they were lent more money in home equity loans, student loans, car loans -- even credit card limits -- than it turns out they can afford to repay. I know the feeling.

Years ago, I got sucked in to the mindset that if I was approved, someone amazingly knew something I didn't: that I could afford it. So I took them up on their offers and lived to regret it in spades.

It is not difficult to figure out what you can afford, provided you're willing to ditch your preconceived notions about lenders and the advice they give.

-- Lenders are people, too. Most of them are in some kind of sales position, meaning they will earn commissions based upon the amount of money they can get you to borrow. They need to make loans to keep their jobs. That sales manager at the car dealership is not thinking about your financial future when he approves you for a seven-year loan. Are you kidding me? He's got his eyes on his next bonus check.

-- Give yourself a test run. Unless we're talking about an emergency appendectomy, chances are you have time to consider whatever it is you're about to finance. Good. Determine the monthly payment you believe you can handle, and then give it a test run. Don't buy the item just yet, but start making the monthly payments to yourself as if you did. If you're sure you can handle $300 a month, prove it to yourself. If after six months you find it is comfortable and you can pay it with relative ease, fine. Now you can enter into that agreement confidently. You'll have $1,800 in the bank for the effort.

-- Borrow the least, not the most. If you are down to the wire and you absolutely need an additional $2,000 to pay for your semester at college, don't opt for $4,000 just because that's what's available to you. That "cushion" will hound you for many years to come.

If you can scrape together a bigger down payment on that car deal, do it so your loan will be the smallest possible, not the most they will lend to you. Ditto on that home mortgage. Instead of borrowing the maximum they'll lend, borrow half that much, and buy the smaller, less costly home. Then pay it off in 10 years, opting for much larger payments than required.

Learning how to take charge when it comes to financing a home, car or other big-ticket item is going to put you in the driver's seat of your next transaction -- not hanging out the back window just trying to hold on through all the dips and climbs of an expensive loan.

Mary Hunt is the founder of DebtProofLiving.com and author of 17 books, including "Debt-Proof Living." You can e-mail her at mary@everydaycheapskate.com, or write to Everyday Cheapskate, P.O. Box 2135, Paramount, CA 90723. To find out more about Mary Hunt and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.
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