March 5, 2016
Everything You Need to Know about Co-signing a Loan
Co-signing a loan may be a requirement by the lender when giving loan. This is the act agreeing to pay the debt if the borrower fails. Individuals with good credit score are often asked by their friend or a family member to co-sign. Although, you are willing to help; you must also be aware of its multifarious aspects. This article will focus on both the faces of co- signing the loan and help you make an informed decision.
What a co-signer is liable of:
When cosign a loan, he or she is pledged to pay the debt in-case the borrower defaults. Moreover, the cosigner is liable to pay the extra amount including late fees and collection money. The creditor has the right to collect the debt from the cosigner without even approaching the borrower (depending on the law of the state). Plus, they can sue or even seize salary.
So, make sure you can afford the amount and are willing to accept the responsibility.
Why would someone consider co-signing a loan?
You might want to co-sign a loan for your son and buy him his first car. You might also want to cosign someone’s education loan! The fact that, credit rejection is common; especially for people with low credit score; you can help them by cosigning a loan. This will help increase their credit score and credit history, as well as get them the transportation or education they need.
Things to Consider:
- Make sure that you can afford the debt amount
- Defaulting may get you sued or lose credit rating
- It may keep you from getting other loans
- Before cosigning, ask your creditor to quote the effective amount you will owe
- You could negotiate and limit your obligations to just the principal and not include the additional charges
- You must take the copies of all essential papers after cosigning
- Know your co-signer rights
Risks of Co-signing a Loan:
Co-signing a loan comes with a lot of risk, like increasing the DTI (debt-to-income) ratio. As a cosigner is an integral part of the loan; he/she must address the loan closing documents. The loan is reflected in the credit report and the monthly payment goes to the DTI ratio. Moreover, as the amount you owe is 30 percentage of the FICO score, hence lowers the credit score. More, is the debt amount, lower will be the credit score. Keep the DTI ratio below 36 percentage.
By co-signing, you are accepting the responsibility and are tied to it until the balance is paid off. There is no escaping once done. However, in certain cases like with student loan, you can avail release from being cosigner.
The bottom line is, if the needs of the borrower outweighs you personal preference, you should choose to cosign the agreement. However, it is advisable to judge you friends trustworthiness wisely. It might not be noble, but this may save you later.
October 25, 2015
How to Buy a Car: Here’s What you Need to Know
Now that you are moving out of your comfort zone and actually willing to buy a car on your own; you will be needing a lot of help. Today, people make decisions hastily, unknown and unprepared about the many nuisances of making a deal. Eventually, most end-up buying a car they didn’t want and possibly at a higher price than they should have.
However, to make things easier, this article will focus on streamlining the complete car buying process in-to easy steps and help you land on a position to make an informed decision.
Choose the Car You Need!
You will find hundreds of make and design; each better than the other! But, you need to choose the model beforehand. Pick a car that fits your needs, lifestyle and budget. Narrow down you list to under five. Also consider the number of seats, size, performance, comfort, head-room and leg-room. Do a thorough research on the Internet, read blogs, review. You could go for a side-by-side comparison.
Know What You can Afford:
Soon after you choose your dream car, its affordability may start to get blur. Its many financing options will make things confusing or even worse. A wise man should figure this intricacies way before going for the purchase. He/She must be honest with the budget, needs and choose only the ones within the price range. Take into account you current car; its exchange value or sell value; calculate your down-payment; what you can afford to pay every month as well as for what duration. Don’t become greedy or impulsive; keep an open mind!
First, check your credit rating! If have a good rating, you are more likely to find a number of beneficial financing deals; like, getting a zero-percent interest finances. On the other hand, if you have a bad credit rate, you may wish to consider trying a buy here pay here car dealership which offers special financing options for those who can’t get financing elsewhere. So, make up your mind and choose the financing that fits your situation best.
You might be lured into buying an extended warranty; however, be wise because the type of contract vary greatly based on the company.
Insurance for Car:
Car insurance is essential, sometimes mandatory according to some laws in the state. For sports cars, turbocharged, supercharged and four-wheel drive vehicles, the insurance rate is higher, typically because of larger engines. Check rates with your insurance before making your purchase and if possible negotiate the price; you will save a lot.
These top tips will definitely get things moving. You should also talk to your friends, family members and neighbors to get real insights on local dealers. It will help a lot if you talk to someone who is experienced.
In Summary, how to buy a car is as much research as anything else. Do your homework and check out all your options.