Before Co-Signing A Loan

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Why To Consolidate Student Loans
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When you consolidate student loans, you bundle all federal student loans that you receive to finance your college education into one. When a new loan is issued, the lender pays off the outstanding balances of the loans you consolidate. In short, it is a practical repayment management option for students.

Why Consolidate Student Loans?

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Auto Loan Tips
Have you ever felt like you bought an auto and financed it and don't really know if you got the right price or financing arrangements after it was all over? Well, don't feel alone. This is a common experience for many people who make auto purchases.

Guidelines for negotiating the car price can be found elsewhere, but we want to share some helpful tips on getting that vehicle financed at... Read loans article



Before Co-Signing A Loan
It is quite common for someone, who is having trouble getting credit, to approach a friend or relative to act as a guarantor or co-signatory for a loan. They've seen that new car they would dearly love, but have one problem. For one reason or another they are a credit risk, and cannot get a car loan on their own. It may seem simple when they say that all you have to do is sign. That's it! The trouble is, that is only the beginning; at least, if things go wrong, signing for the loan is not "all you have to do."

The Reality Of Co-Signing A Loan - What You Should Know

Before you finally co-sign that loan application, there are a few things you ought to know. In reality, it is not just a matter of signing the loan application. You will be entering a serious loan transaction, in which you will have responsibilities, just as if you were applying for the loan yourself. If your friend does not keep up the repayments on that car, or other, loan, the lender will seek the best way to get the money. Their first port of call? You!

If you are asked to co-sign a loan application, here are a few points for you to take into account. Stop and think about them. Ignoring them could lead you to lose a lot of money yourself, and possibly fall out with your friend.

1. Your Friend Is Probably A High Credit Risk

If someone is asking you to co-sign a loan, that means that the lender is unwilling to take a risk on them on their own. This means that their past credit performance has been so bad that the lender doesn't believe your friend will pay back the loan. Do you want to be the fall guy; the one who carries the risk? You are not a professional lender, and your judgement may be impaired because this is a friend.

2. Impact On Your Credit Report

You have probably worked hard and responsibly to keep your credit report clean. Your friend would benefit from that if you co-sign the loan, but did you know that if your friend becomes delinquent with his payments, it could affect your credit report? All your good work down the drain because of your trying to help a friend.

3. Your Legal Responsibility

By placing your signature in the co-signatory's spot, you will be guaranteeing that if your friend does not make the payments, you will. Do you really have the spare money each month to cover the loan if it came down to that?

4. The Collection Process

If your friend defaults on the loan, and it goes into the collection process, it is possible the lender will bypass your friend and come after you first. After all, they knew he was a risk, and you are the one with the better credit record and more likely to have the money. The law will vary between countries, but in the US this is true in most states, and it would be important to find out where your own state stands on this policy before.

In addition, you should be aware that by co-signing for a loan you may actually reduce the amount of credit you will be able to get yourself. Your friend's loan will count towards your total debt owed.

5. If You Decide To Go Ahead And Co-Sign For A Loan

If you do finally decide to co-sign for a loan, here are a couple of steps that you should take in order to protect yourself as much as possible:

Firstly, it is wise to request that you will be notified in writing, should your friend miss or be late with a payment. By learning of any problems early on, it will help you keep the potential damage to your own credit report from getting out of control.

Next, make sure you also get copies of all the loan documents, plus the repayment schedules. Ask for a copy of everything that your friend gets, in case there is ever a dispute. Then you will know what legal rights you have.

Being a co-signatory for a loan is a serious responsibility, and is something that you should think long and hard about. Even if it is your best friend who is asking you, think seriously about the consequences. It is not just the potential financial loss to you; your friendship could be on the line. Friendship and money often do not go well together, so beware.

This co-signing for a loan article was written by Roy Thomsitt, owner of the Eliminate Credit Card Debt Now website

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Unsecured Loan Advantages

Why choose an unsecured loan? An unsecured loan can be used for almost anything - a relaxing holiday, a new car, a wedding, debt consolidation or home improvements. These are just some of the reasons why people choose an unsecured loan.

If you want to raise money for most purposes but do not want to offer your home as security then an unsecured loan could be the solution.

For an unsecured loan the amount and period you can borrow varies. Lenders offer loans even as small as £500 and can go up to £25,000. The repayment period can be anywhere between six months to ten years.

Unsecured loans are offered by banks, building societies and also by the larger supermarkets chains.

Whatever you need it for there are a few things to consider before applying for an unsecured loan.

With an unsecured loan, the lender has no claim on any particular asset. Unsecured lending is generally more risky than secured lending, which is reflected in the relative rates of interest.

An unsecured loan is actually a loan where the lender has no claim on a homeowner's property in case the person fails to repay. The lender is solely relying on the ability of the borrower to meet their loan borrowing repayments.

With an unsecured loan, you're not borrowing against the value of your house. You will usually be offered an interest rate based on your circumstances and the amount you want to borrow. This means that the 'typical' interest advertised might not be the rate you are offered - your rate will depend on your credit rating.

If the borrower defaults on an unsecured loan the lender cannot repossess the goods, but has to resort to other legal remedies to recover the capital, interest and costs.

You should usually borrow as little as possible, and draw up a budget plan to determine how much you need. An unsecured loan might not offer a particularly high amount, so if you're a homeowner and need to borrow more, you could look into secured loans.

Unsecured loans are invariably more expensive than secured loans because the lenders have no guarantee that you can repay the loan, and therefore charge you more in interest to cover the cost of insurance policies that they need to take out to protect them should you default on repayments.

In the event that a borrower does not pay up, the lender will invoke the terms of the legally-binding credit agreement and pursue the borrower through the legal system.

Lenders are obliged by law to tell you how much they charge for this type of finance and this is worked out as an annual percentage rate (APR). Ask whether the APR figure quoted is 'typical' or is what every applicant is charged.

Check whether there is an early repayment penalty.

You may freely reprint this article provided the author's biography remains intact:

About The Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.


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