Co-Signing Loan Blunders

Co-Signing – Why to Never Do It

Credit isn’t exactly easy to come by these days. And if you happen to have a good credit score, there’s a chance that sooner or later you’ll be approached by a friend or family member and asked to co-sign on a loan or credit card for them. By doing so, the person with poor or limited credit is able to leverage your positive score for a better interest rate. But is credit a win for you, the co-signer, as well?

The answer: Not necessarily. While you agreeing to be a co-signer is likely done with nothing but good intentions, the outcome could turn out to be far from favorable for you. We’re talking a decreased credit score, collection agencies coming after you and even potential lawsuits. Here’s a closer look at why you should think twice about co-signing on a loan:

  • Lower credit limit: Like we said in the opening, credit is limited these days. So if you co-sign on a loan, you’re debt ratio might get too high. Not only is this unfavorable for your financial situation – after all, you’re responsible for the debt – but it can lower your overall score, resulting in credit repair to get your score back up to what it was.
  • Missed payment: Is the person you’re co-signing for reliable? We ask because if the person misses a payment, the collection agency can come after you for it. It’s not what a lot of people have in mind when they agree to co-sign, but unfortunately it becomes a common reality.
  • Lawsuits: As a co-signer, you’re just as responsible for the debt as the other signee. So if the other signee defaults on the loan payment, you could potentially be sued for the amount owed.

Simply put, if we’re offering credit tips, we’d advise you to co-sign with caution. If you’re approached by a reliable person who has a limited credit history or finances or you are trying to help out your child with his or her first car loan, that’s one thing. But if you’re approached by someone you know is shady and unreliable, that’s a whole different story. So co-sign with caution – because if you’re not aware of the consequences, you could end up on a lengthy quest to repair credit and enact a debt management plan to cover for someone else’s blunder.

For more information on how to repair your credit, please contact our office at 617-265-7900 or request a consultation below.

Good Debt vs. Bad Debt

Debt – Good vs Bad

We are accustomed to perceive of debt as 100 % derogatory. And also, it can make sense: all financial obligations, regardless of the kind, can be bad number in your possessions, lowering your family’s net worth. Yet, the comprehensive review is not that simple. Some forms after a while, will aid the stability, your possessions as well as your ability to earn money. A few typical kinds of financial obligation and their impact on your economic well-being.

Home loans

Without a mortgage, you are not able

to actually take advantage of the real estate market. Mortgage is reasonably low-interest lending that can permit you to develop equity & your individual monetary declaration in time.

As your wide range increases, your monetary ability might increase too. With the majority of routine payments and also a normally cherishing real estate market, a residence can permit you to build a protected location to retire or a nest egg to make use of toward your retirement destination.

Of course, not every home mortgage situation is constructed alike. If you bought a couch throughout a time of high real estate prices or obtained a finance with a changeable rate of interest, you might end up with a property that deserves much less compared to you owe. Always study lasting fads and research your home loan contracts very carefully prior to you dedicate.

Sallie Mae Loans

It utilized to consistently be presumed that pupil financing were good debt due to the fact that they resulted in a greater paying occupation. But, enhancing education and learning costs and also transforming work markets mean that it should be participated in meticulously.

Study increasing fields to make sure that your degree will certainly result in the very best feasible job leads. In general, college grads gain greater than those that lack degrees. Yet, majors and the areas where you eventually prefer to live will identify exactly how important a student loan is as an investment in your future.

The “Worthless” Bank card Financial obligation

Vacations, clothes, precious jewelry as well as technical playthings is almost always an unfavorable. These things are almost never possessions that will expand in value. Whenever you would like to purchase something on credit, ask whether you have the money to pay the financial obligation off completely when your bank card declaration comes. If the solution is no, carefully take into consideration whether future you would certainly enjoy living with less money because you of today would like to splurge.

Car Lending

Automobile finances are another group of lending that, generally, will not assist you construct your net worth in time. However, there are a couple of various other factors to consider that can make them worth your while. If you live much from your task and also require an especially reliable auto, a car loan can be rewarding. It might enable you to get a newer model, which improves your job protection. Additionally, if you are in the procedure of rebuilding your credit rating, an installment financing could assist enhance your score. Simply make sure that you choose a funding with inexpensive settlements that has no charges for prepaying as well as will offer you the possibility to make adjustments as your credit report enhances as well as you increase your monetary worth.

While most of us can not live completely debt-free, there are significant distinctions between just what is considered “great” financial obligation as well as “bad” financial obligation. Though some financial obligation come under a bit of a dirty location, great financial obligation is merely specified as money obtained to spend for choices you really need or that value in worth, and also uncollectable bill is built up for products you simply really want and that usually drop in worth.

A write-off is a quantity owed by a company that is extremely unlikely to be paid due, for example, to a company entering into liquidation. There are numerous technological meanings of just what makes up a bad financial obligation, depending upon accounting conventions, governing procedure as well as the establishment provisioning. In the U.S.A, bank loans with more than ninety days’ defaults end up being “trouble financings”.

For more information about how charge offs can affect your credit score you can contact one of our team members. We would be happy to help you challenge those records that are no longer collectable per the FDCPA. The consumer has rights. But you must choose to exercise them.

Bad Credit Car Loans: Say No to the Yo-Yo

An auto loan can be one of the easiest ways to build credit. Car loans are granted more easily than other types of installment loans, with one-quarter of all auto financing going to people in the sub-prime market. But, low credit scores and lack of financial education make some people vulnerable to auto loan scams. Financial experts say that people with credit scores of 680 or lower are considered subprime.

Caught on the Bad Credit Car Loan Yo-Yo

Unscrupulous car dealers will sometimes attempt to hook unwary buyers and exhort unreasonable fees and interest rates. The way the scam goes is this: the buyer leaves with the car and a signed contract. But, since most car purchases occur on evenings or weekends, the full paperwork for the loan has not been put through. Then, the buyer gets a call: they were not approved for financing. The dealer offers a new deal, usually with a higher down payment, higher interest and terms that go up to seven years. If the buyer asks to return the car, they are threatened with high “rental fees” for the time they had it, or outrageous cleaning charges. Some dealers even threaten to have the car repossessed or to report it stolen.

Protect Yourself from Scams

The first defense is, if possible, to avoid leaving before knowing that your credit deal is a sure thing. One way to do this is to make your own deal with a bank or credit union for a car loan instead of using the dealer’s lender. Or, get pre-approved for a loan before you shop for a car so that you know whether you will get the credit deal that you want. A pre-approval lets you know how much car loan you qualify for so you don’t wind up looking for something that is out of your price range.

If you do decide to use the dealer’s financing, make sure that you read all paperwork carefully. Do not sign anything that involves conditional terms; these can open you up to a bait and switch.

If a dealer calls you after you’ve left the lot and says that you need to take a more expensive finance deal, ask to see the rejection notice. Often, this demand will be enough to set things back on track. But, if you were indeed rejected, you may need to return the vehicle or agree to the new terms. Should you get a loan that does not work for you, make payments on time and work to refinance later.

And, always be prepared to make different plans. You may do better looking at a used car than a new one. Talk to credit unions and member organizations like USAA to see if you can get a better deal. Most of all, keep educated about your options so that you keep your credit clear and your finances safe.