Friday, June 1

Top Five on Money and Credit

I read many personal finance blogs every day. This I do for a number of reasons, one of which is to find blogs written by real people about real-life money situations.

So that you too might benefit from these blogs, and to give them additional exposure, I've added links to the "Top 5 on Money and Credit" in the right hand column.

From leveraging Prosper, to the lowest balance transfer rates, to getting answers about Quickbooks, you could find something that "fits the bill"!

Please check out these blogs and feel free to comment here, and there, about what you found!

Tuesday, May 29

The Good, The Bad, The Despicable

The more that we hear and learn about this subprime mortgage hoopla, the more disturbing it gets.

I spent many a year helping folks find their path to the American Dream, home ownership. Not once did it cross my mind, and as far as I know, the minds of my colleagues, to fabricate facts in order to qualify an applicant for a home loan. On the contrary, we took steps so as to be as reasonably ensured as possible that the loan was not only affordable for the borrower, but that we would be repaid.

The greed, the shameless unabated grab for money by these unscrupulous loan officers is nothing short of a crime. Fraud? Robbery? Both? The people that have created this catastrophe have tarnished the reputations of the professionals in the industry. How long will it take before people trust the true and professional mortgage loan officer again?

It doesn't help that most people don't know the difference between a mortgage loan broker and a mortgage loan banker. To set the record straight; work with a banker, not a broker. While they both are out to make as much money as possible, the banker is much less likely to take advantage of someone. Think of a broker along the same lines as you would the plaid jacketed used car salesman...

Money was made hand over fist at the expense of other peoples dreams and aspirations. Taking advantage of hope. Despicable....

Monday, May 28

Co Signing a Loan

Are you thinking about co-signing a loan for someone? Better think carefully. Co-signing isn't vouching for someone's character. You're putting your own Money and Credit on the line.

Before you sign on the thick black line (in all my years of asking people to sign, it's never been on a dotted line), you should consider a couple of things.

  1. Who are you co-signing for? What is their character?

  2. How will your ability to obtain a loan be effected by co-signing?

  3. What is the borrower's ability to make payments?

  4. How liable will you be for civil matters arising from this loan?

  5. Where is the loan coming from? Local bank? Credit Union? Finance Company?

  6. What is your ability to make the payments if the borrower doesn't?

Who are you co-signing for? What is their character?
How well do you know this person? Is she a co-worker, a friend, a family member, or a girl friend? How long have you known this person? Do you have personal knowledge about how they have handled their finances in the past?

How will your ability to obtain future loans be effected by co-signing?
Because you are 100% responsible for repayment if the borrower defaults, most lenders will look at this debt as if it were yours, and subtract the monthly payment from your discretionary cash flow. Depending on your financial circumstance, adding this co-signed obligation may impair your ability to obtain future loans.

What is the borrower's ability to make payment?
This could fall under knowing your your co-signing for. Do you know where they work and how long they've been their? Do you know of any other sources of income and how long it's likely to be available to service this debt?

How liable will you be for civil matters arising from this loan?
What happens to you if you co-sign for a car loan and the car is involved in an accident? Could you be sued too? What if the loan goes into default, the car is repossessed and sold leaving a deficiency? You will be sued along with the borrower for the balance.

Where is the loan coming from? Local bank? Credit Union? Finance Company?
You need to know who is lending the money. If a finance company (anyone other than a bank or credit union) be wary! It is likely that the person that you're co-signing for was not able to get a loan from a bank or credit union, and is resorting to a finance company. You know that if a finance company is looking for a co-signer, there are some serious credit issues. This is a HUGE warning sign and should deter you from signing for this person.

What is your ability to make the payments if the borrower doesn't?
Could you afford this payment? You need to be able to afford the payment as if it were you're own because if the loan defaults, the lender is coming to you for repayment.

Be very careful when co-signing a loan for somebody. There are many implications that you need to consider. Understand what you're getting into, and with whom. After you sign, there isn't any turning back. Click here for information fromt he FTC about cosigning. Good Luck!