Whether it’s for your spouse or your child’s student loans, be sure to think twice before co-signing a loan. With many people throughout the country still struggling in the midst of the economic recovery, cosigning a loan presents great risk and little reward. It might seem that refusing to cosign a loan might create personal tensions, but it also ensures financial stability as well. While the choice of whether or not to cosign a loan is ultimately up to you, consider these concerns.

Should Someone’s Debt Become Your Debt?

When you cosign a loan, you’re basically carrying someone’s debt on your shoulders. Should they fail to make payments and default, you are the one responsible. Even if you know they’re capable of paying back the debt, you never know when an unforeseen event such as a job loss could trigger a negative chain of financial events including liability for the credit debt. Reasons to reconsider cosigning a loan include:

1. Lawsuits against you. There are some cases where the creditors file a lawsuit against the cosigner and not the person who actually gets the loan. In one particular case, a client cosigned for her boyfriend and was sued because he stopped making payments. The lender sued her because she was the reason he received the loan in the first place.
2. Destroyed relationships. If there are any financial hardships and you are placed on the hook, this could destroy any type of relationship whether it’s familial or friendship. Remember, financial situations have ruined many families.
3. 100 percent liability. If the other party fails to pay, you are responsible for the whole loan, not just part of it. Are you sure you want to take that risk?
4. Future loan denial. Some people have been denied loans or credit because they cosigned on another loan. Having too much credit under your name can cause the application to be declined.
5. Tax consequences. Let’s say the person who borrowed the loan fails to make the payments. Well, the creditor might not come after you directly through lawsuits or payments. They could also settle the balance owed, meaning that the difference becomes a tax liability for you.

With student loan debt at an all-time high, you might be wondering how to deal with such a massive and growing problem in your personal finances. The average student these days is leaving college with a debt level well into the six-figure range – sometimes with even greater numbers for expensive higher-education schools. Managing that debt might seem hard, but there are a lot of tips and helpful hints out there for dealing with student loan debt.

Dealing with Debt

Student loan debt can be dealt with first by knowing and understanding the different parts of your situation. Have all of the paperwork, study it, and understand the situation you are in. Knowing is the best tool in your toolbox for approaching and solving your debt issues. Importantly, knowing the length and terms of your grace period can also help you get ahead on loan payments and figure out a plan for how to escape the debt.

Paying off the most expensive loan seems obvious, but some people don’t think of it. Getting rid of the most difficult of your student loans will help you progress more quickly through the others. Lowering your principal on some of the loans will also help make the payment process easier on your current finances and financial health.

The biggest piece of advice is to not simply ignore your student loan debt. It will grow and come back to bite you if not paid off quickly and efficiently. Knowing your options and exploring the possibilities, no matter how small and simple, will help you get out from under your student loan debt. Debt negotiations are possible and can be successful in many cases. These small steps will help you escape from the past of your student loans and into a future with financial freedom written all over it.

For many aging homeowners money can become tight as the retirement funds dwindle and the cost of living increases. When cash flow becomes a problem many people are now being enticed by options like a reverse mortgage. Although they can certainly provide quick cash, they do come with some additional considerations.

Costs Of Cash Flow

A reverse mortgage is essentially a loan against the equity built in your home; meaning, you are taking cash in exchange for releasing the equity of your home to the lender. In other words, you are using your home’s equity as collateral against the repayment of the loan. You get cash to use as you wish, but it must be repaid in order to obtain ownership over the equity once again.

The main “cost” of a reverse mortgage is simple: mortgage debt. For many, paying off the mortgage and owning a home free and clear just became a reality. When you take out a reverse mortgage, that ownership is gone and you are once again tied to the lender by a debt.

There will also be origination, processing and closing cost fees associated with the generation of the new loan, which can run upwards of thousands of dollars depending on the home’s value. Many people are financially unprepared for these out of pocket and refinancing expenses.

Qualifying for a reverse mortgage loan may also my difficult. Besides a 62 or older age requirement, many lenders will require that the home be your only residence, meet HUD standards and you carry a moderate to high credit score.

Lastly, the loan must be repaid upon moving out, selling the home or upon your passing. Many people assume the borrower’s family will assume responsibility for the loan payments. This is a myth. However, the lender will have the right to recover the home if the reverse loan payments are not made and the asset will be liquidated to satisfy the debt.

A recent study indicated that it can take the better part of a decade for those who have experienced a foreclosure to buy again. Of course, there are many factors that play into this statistic, one of which being a lack of confidence. As for the credit and financial factors, there is something that can be done to reduce the turnaround time on buying a home after a foreclosure.

Bouncing Back

Mortgage debt is stressful and anyone who has experienced understands the hesitation in getting back into a mortgage loan. However, owning a home is still a very real possibility after a foreclosure, it just takes a little time and patience.

The first step towards buying after a foreclosure is credit repair. The object of getting new credit after a foreclosure is to establish yourself as a responsible borrower to minimize any risk in the eyes of borrowers. Start with unsecured credit and move into at least one line of secured credit, like a car loan. Maintain timely payments on these accounts and give it time to boost your credit.

While you are taking time to improve your credit, begin saving money for a future down payment. Having a larger down payment in cash will increase your chances at a better loan when you are ready to purchase. Shoot for having at least 10-15% in cash towards the purchase of your next home. While 5% is adequate to secure a loan, many lenders look more favorably on those with higher down payments.

Last, and most importantly, buy within reason. Make sure you don’t get in over your head with your next home purchase. Remember that even if you can afford a home, consider your ability to maintain a payment if the unexpected happens. Financial hardship can strike at any time, and having a manageable payment or adequate savings account can keep you out of mortgage debt troubles.

You’ve probably seen the flashing signs and unkempt store fronts advertising payday loans for your entire life.  And, now, as you run into some financial troubles, it might be tempting to walk inside and see what all this payday loan business is about.  In two words, we can tell you: no good.  However, give us a couple minutes to expound.  We have a short list of why you should never take out payday loans.

Don’t Take These Loans!

Payday loans make money by charging extremely high interest rates.  In fact, these places are so notorious for their high interest rates that many states have legally capped the rates that can be charged.  Also, because payday loans are so easy to get, they can be too tempting for many people!

You can end up paying rates that translate to 300% in annual interest!  This is absolutely insane.  Even if you’ve fallen on hard times, look for other options.  Also, many people get trapped into a lifestyle that depends on payday loans.  This kind of debt can be more costly and damaging than other kinds of credit debt.  Don’t fall prey to the cycle.

Lastly, if you’re considering payday loans, then your credit score is probably not in great shape.  However, taking out a loan from one of these places won’t do it any favors.  It could even damage your score!

All forms of credit debt can be messy and undesirable, but this can be one of the worst forms.  Try to find alternatives.  And, if you absolutely must take out a loan from one of these places, repaying it as soon as possible should be your top priority!

Time and time again, we hear stories from clients who have given personal loans to their friend, mom, sister-in-law, neighbor, you name it.  Every time we think we’ve heard them all, we hear another story that makes us realize we still have a long way to go.  It can be hard to turn down a friend or family member in need – especially when you’re a kind and generous person.  However, granting personal loans to people who are close to you (whether the loan is “official” or not) can be a dangerous road to go down.

Why You Should Avoid It

Essentially, when you grant loans to friends or family members, you change the nature of your relationship.  When there’s a debt between two people, the relationship isn’t going to be healthy.  You’ll find that the debtor is likely going to be more stressed, and the time you spend together might focus on money issues.

Even if this person is someone you’re really close to, your relationship will be affected.  Trust us on this one.  Encourage the loan-seeker to seek a loan from a financial institution.  If the person can’t get a loan from a bank or can’t even get a payday loan, then you probably wouldn’t want to grant them a loan anyways.  Also, recommend that they look into debt negotiation.  It could help their financial situation!

If you absolutely must give this person a loan, do so under the assumption you will never get your money back.  It will relieve the tension in your relationship.  Sound stressful?  We point you back to the top: avoid giving personal loans at all costs.

For many Americans, loans are simply a way of life.  If you need a new car, you probably don’t have the cash sitting around to pay full price.  If you’re in the market for buying a house, you almost definitely don’t have enough to pay for a home in full.  However, that doesn’t mean you’re stuck with picking up a cumbersome loan.  Consider this alternative.

One Creative Alternative

Let’s say you’re in the market to buy a car.  It’s a very modest, gently used car, priced at $16,400, including all taxes and fees.  Let’s say you have several options when it comes to loans, but the one that seems most reasonable is a 3-year loan (36 months).

To pay for the car in 36 months, you’ll be paying $455 per month plus interest.  If you have an interest rate of 3%, you’ll be incurring some pretty serious credit debt over that three-year period.  In this example, you’ll end up paying $769 in interest over the course of those three years.

Credit debt can really add up!  So, instead of paying that interest money to the bank, why not keep it in your pocket?  Maybe you have the $16,400 in a savings account that you won’t need immediately?  If so, try paying for the car in cash.  Then, repay yourself $455 into the savings account each month (interest-free!) for 36 months until you’ve replenished your funds.

One factor to take into consideration before going this route is the interest your money is earning in the savings account.  If your money is earning more than the interest on the car loan, then it’s profitable to go with the car dealer’s offer.  Otherwise, try paying cash, and repaying yourself!

When it comes to obtaining a mortgage loan there is a lot to think about. Not only should you be concerned with the interest rate and terms of the loan, but the type of loan you are applying for also matters. There are some important differences between a FHA loan and a conventional loan.

FHA vs. Conventional

A conventional loan refers to any loan that is not guaranteed by the federal government and can include several variations of a loan, some of which may be referred to as conforming, A paper, subprime, or BC (bad credit) loan. Since they are not backed by the government they often have less lending restrictions and are easier for some potential buyers to obtain. The credit standard to qualify for a conventional loan is often more flexible than a FHA loan, and may even allow for a lesser down payment requirement. Conventional loans are common among first time home buyers, those with credit challenges or have experienced debt troubles in the past.

On the other hand, a FHA loan is guaranteed by the federal government. FHA loan requirements are more strict than conventional loans. Higher credit scores and down payment requirements are common with FHA loans, which often disqualify many people from purchasing a home. However, a FHA loan does offer better mortgage debt assistance in the event of financial hardship. In many cases, those with a FHA loan find it easier to negotiate a loan modification, refinancing agreement or other foreclosure alternative than those with a conventional loan. Why? Simply: the government does not like to lose money and the money the guaranteed in your loan is important to them.

Borrowers are often taken back by the amount of detail needed from lenders when applying for a mortgage loan. The lender often wants an in depth look at your finances, income, debts and credit history in order to gauge your risk as a borrower. Although this may seem like an inquiry into your personal information, you must remember what the lender’ stake is when approving a loan.

Risk Assessment

The lender holds 100 percent of the risk in a mortgage loan. If you default on the loan, it is the lender who will lose money and possibly gain the responsibility for selling the home. If the home is damaged, poorly valued or in disrepair, selling the home could prove difficult for the lender and leave them with a property they cannot unload.

Foreclosures are equally devastating for lenders and most lenders today are just as afraid of a risky loan as the borrower is losing the home. Lenders have also been hesitant to approve refinancing or loan modification applications due to similar risks. If a lender was to offer you a better interest rate on the loan or a reduction in your monthly payment, they lose a considerable amount of profitability on the loan. If you were to end up in default down the road, their efforts were essentially wasted.

The assessment of risk is what makes lenders stubborn with their lending practices, which has lead to a circular problem with homeowner default. Homeowner hits a financial hardship, lenders refuse a mortgage debt solution and the borrower ends up in foreclosure. Many industry experts have been pushing to break this cycle of inflexible lending and homeowner default in order to help the market recover.

If you are struggling with your car payments, or simply looking for better loan terms, auto loan modification is one way to lower your payments. While modifying your interest rate or loan term can lower your payments and save you some money, there are a few things to be aware of with these modifications. The biggest trouble these days is finding legitimate help with a car loan.

Fighting Fraud

There has been an increase in auto loan modification scams in recent years. The Federal Trade Commission has been working to increase regulations of such practices and investigate allegations of fraud, but they can’t do it alone. Luckily, the Better Business Bureau is also keeping an eye out for violations of lending practices and helping to field consumer complaints.

Consumers should also be aware when seeking debt relief help from third party companies offering to assist with debt negotiations or loan modifications.  Companies that provide lavish promises of services or “guarantee” they can lower payments should be considered with caution. Only the lender can approve a modification and, even then, there is no guarantee a lender will be willing to negotiate the terms of the agreement. Charging upfront fees for services, requiring collateral or offering to make payments on your behalf are also red flags that indicate there could be a problem. The bottom line is: if you are having trouble with your car loan payments or looking for a better deal, contact your lender directly.