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Showing items Tagged with: cosign
  • Should you ever cosign on a loan?
    Submitted by: Jesse Campbell on April 04, 2014

    Father and son discuss cosigning a car loan

    Cosigning is risky, but the parents of millennials are cosigning for their children at an alarming rate. Is there a better solution?

  • Don't be spooked by financial decisions
    Submitted by: sitecore\kmcgrigg on October 28, 2011
    Halloween tricks or treats come along only once a year, but the consequences of financial decisions usually last far past the next spooky holiday. Options that seem good on the surface, if not handled properly, can have long-lasting negative consequences.
  • Dangers of co-signing credit applications
    Submitted by: sitecore\kmcgrigg on October 19, 2011
    The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 requires that people under 21 have a co-signer or a job in order to open a credit card.
  • What to do if you cosigned a loan & regret it
    Submitted by: sitecore\kmcgrigg on March 11, 2010

    There are many reasons to refuse a request to cosign a loan.  But what can you do if you've already cosigned and regret the decision?

  • Is a credit card a must for college students?
    Submitted by: sitecore\kmcgrigg on August 21, 2009

    Parents across the country are having the talk with their young adult as he or she heads out the door to college. This year, however, the talk isn’t about sex, drugs and rock and roll. Instead, it’s about whether or not the student should apply for a credit card before the new regulations go into effect in February 2010. The recently passed CARD Act will require a person less than 21 years of age to either document their ability to repay the debt, or have a co-signer before being granted credit.

    The new law will also regulate aggressive credit card marketing to college students. In years past, issuers enticed students to apply for cards by making offers of free t-shirts, beach balls, or even chances for an iPod. Some states have already passed laws restricting or regulating credit card marketing on college campuses, and with good reason.

    A recent Sallie Mae study revealed that college seniors carried an average credit card debt of $4,100 compared with $2,900 five years ago. College freshmen tripled the amount of debt on their credit cards, going from $373 to $939 over the same date range. Keep in mind that this segment of the population typically has no income and no credit history, but has nonetheless been extended credit.

    When it comes to building a positive credit record, the student has some options. Following are some things parents and young adults should consider when deciding what would be best for their situation:

    Become an authorized user on the parent’s card. This is a practice known as piggybacking, and is exactly what it sounds like. The student is attached to the parent’s card and has charging privileges, but no legal responsibility for payment since the card is not in his or her name. The activity on the account is reported to the credit bureau in both the parent’s name and the student’s name, thus the young adult builds a credit file of their own. This option allows the parents to monitor the student’s spending, and remove them from the card if things get out of hand.

    Get a secured credit card. This type of credit card requires a cash collateral deposit which then becomes your line of credit, thus limiting any abuse. Consumers need to be very careful when applying for this type of card, as some charge high fees which can greatly diminish your spending power. You can also expect a secured card to have an annual fee and a higher interest rate than an unsecured card. Make sure that the issuer reports to the credit bureau. If they do, and if you pay responsibly, a secured card can not only be a safe way to build a credit file, but after a year or so will likely qualify you for an unsecured card.

    Obtain a card in the student’s name. Since the clock is ticking on the availability of this option, it definitely merits a conversation between the student and the parent. If the young adult has some financial training and experience with credit, and has demonstrated that he or she can handle it responsibly, then having a card in their own name could be a good way to launch their own credit file. Student credit cards typically have low credit lines, thus somewhat limiting the amount of financial damage that can be done. However, an irregular payment history on even a small debt can damage a credit file, which defeats the purpose of having a card.

    In addition to lenders, employers and landlords also review credit reports. Therefore, it is important to graduate from college, not only with a sheepskin in hand, but a positive credit file.

    This post was provided by The National Foundation for Credit Counseling (NFCC). Money Management International is a member of the NFCC.

    For more about college and credit, check out:

    Frugal tips to ease back-to-school shopping expenses
    Survey Says: Save more for college
    Economy calls for a change in college plans
    Earn an “A” in personal finance this semester
    New & old ways to pay for an education

     

  • Friends and money don't always mix
    Submitted by: sitecore\kmcgrigg on May 12, 2009
    For many years, I had a secret identity. I was “Susan” of the MMI’s “Ask Susan” advice column. The truth of how this came about is far less exciting than it seems—I inherited the column from someone named Susan. After answering more than 30,000 questions, I “retired’ from the column. Today, the column is called The Advice Team and questions are answered by some of the most qualified people in the industry. Thankfully, I still get to fill in when one of them goes on vacation because I really love talking (or in this case, typing) with people one-on-one. During my most recent stint as a substitute, I noticed that several people were worried about how their personal relationships are being negatively impacted by money. In case you are struggling with the topic of friends and finance, following are a few of the questions I received and answered.

    Dear Advice Team: I let my friend and his wife borrow $2,500 more than a year ago. They are making payments as agreed, but I can't help to get annoyed when I see them spending money frivolously. They even went on a trip recently—I can’t even afford to do that! What can I do about this situation? -Steve, Minnesota

    Steve: While you may not agree with all of their spending decisions, at least they are keeping their promise to pay you back. I believe that when you lend someone money, it is important not to assume a position of power. Being too authoritative could damage your friendship.

    •••

    Dear Advice Team: In October, I loaned my friend of 12 years $4,000. I wrote her a personal check for the amount of the loan. She verbally agreed to pay me back all of her income tax refund. Well, she got her income tax and spent it all, without notifying me. I called her and she said that she would pay me $100/week until balance was paid. That was three weeks ago and I haven't heard from her. I am a single parent and trying to go to school. She knows I need it. What can I do? -Cheryl, Phoenix

    David: I am sorry you are dealing with this delicate issue. Since your friend has not kept her end of the bargain, it is past time that you begin treating the loan like you would any other business matter. Discuss the terms of the agreement and put the details in writing. Be sure to list both parties involved, the interest rate, due dates, payment amounts, and penalty for late or missed payments. Document the date and time of any letters or phone calls, and be sure to make note of all the responses to your attempts. Your records may be necessary if you plan to take the matter to court, or if you plan to write the debt off as non-business bad debt on your next tax return.

    •••

    Dear Advice Team: I recently co-signed for a car loan for a friend. This "friend" has duped me and she won't pay. My question is: how can I get my name removed from the loan? I don't want to pay for a car for her. Her name is on the title and she has a car free of charge! I have learned my lesson; I just want to know what can be done—before my credit is ruined. -Mark, Tennessee

    Mark: Helping someone obtain their goals can be very rewarding; however, far too many friendships end when money is involved. Unfortunately, there is no simple way to “remove” your name from a cosigned loan. In order for the primary borrower to assume total responsibly for the debt, she would have to apply for a new loan and qualify on her own. (I am assuming that this is not possible or you wouldn’t have been asked to cosign in the first place.) Talk to your friend about selling the car and repaying the loan. Seek mediation if necessary. If this is not possible, you might consider protecting your credit rating by making the payments to the creditor yourself and then collecting from her. Because the stakes are so high, I recommend that you seek legal advice to understand your rights and responsibilities.

    •••

    If you have a question for the Advice Team, please don’t hesitate to ask!
  • Q & A about teens & credit
    Submitted by: sitecore\kmcgrigg on February 27, 2009
    A while back, I participated in a televised call-in show about kids and money with members of the Jump$tart Coalition. In preparation, I posed questions to a group really talented, dedicated people from organizations like Young Americans Bank, The American Institute of Certified Public Accountants, and the Financial Planning Association. The result is one heck of a resource on kids and money with topics covering budgeting, credit, cars, school/college, and jobs.
  • How much should you know about your 20-something’s finances?
    Submitted by: sitecore\cwilliams on February 17, 2009

    Every mother can remember very vivid moments in her children’s lives. The first step, the day they won an award, and those times when you were sure you had taught them how to tie their shoes. But even when they reach 20-years-old, you'll cringe when he or she walks out the door with their $120 shoes untied.

    Those are much the same feelings as a parent has when they hear the words, “Mom, I just need $60 until payday or “I just didn’t think things would work out this way, but I need $500—soon.” Every parent reflects back to the time you were just positive you showed your child how to balance a checkbook or your explained how to plan ahead for the unexpected things in life. But when does financially helping your “adult children” cause more problems than their current issue? How much should you know about your 20 something’s finances beyond “we're good” and you see the lights and heat are still on and there is some food in the refrigerator? The answer is: more than you think.

    About $40 billion in parent-to-child loans are made every year. Whether or not those debts are repaid might depend more on the lenders than the lendee. A national financial literacy organization, Jump$tart, conducts a biannual survey of high school seniors. Over 55% of students from all over the U.S. report they learn their money management habits form their parents. If this is not comforting information, rest assured that it is never too late to become a financial role model. Here are a couple of things to consider if/when your adult child asks to borrow money:

    1. Think back on their financial history. Have they borrowed money before and have they paid you back?
    2. If you take it out of your savings and something happens to your financial situation, will you be okay?
    3. Do not be shy about asking to see their checking account statements and credit card bills. Was this really something that just happens or is there some thing they could do to help the situation?
    4. Don't agree to cosign or your put your credit history at risk. If you must, take a loan out on your own and then attempt repayment from your son or daughter.
    5. If you do “lend” child cash and they agree to a repayment plan, don’t criticize them about how they are spending their money. There will be plenty of time if they don’t make the payments!
    6. If you give them money, let other siblings know. Fair is fair and keeping family secrets will not make for a Norman Rockwell Thanksgiving.
    7. Keep your promise. If you swear you will only lend money once, and then be ready to turn them down should the second time arise.
    8. Give serious consideration when you invest in a business with your children. Ask the exact same questions you would if you were investing with a total stranger.
    9. Be prepared to say NO if need be and be prepared to tell your child why you can’t help.

    Most parents gloss over money matters with their children. Most don’t always serve as role models but if you have reached at the point in life, your child trusts you to ask, you have no doubt done some thing the right way. And start now with teaching and sharing good money management skills with other family members. It is a gift that can last a lifetime and give everyone a degree of security.

    We are so exicted to one of the sponsors for the upcoming Mom 2.0 Summit in Houston. In honor of the event, this week's Blogging For Change posts will be by moms and for moms (& dads too)!

    I'm attending The Mom 2.0 Summit

     

  • Where helpful & harmful sometimes meet
    Submitted by: sitecore\kmcgrigg on February 02, 2009

    It may seem very helpful when someone offers to handle paperwork on your behalf. However, before you agree to relinquish control, you should know that you are ultimately responsible for your finances—and any mistakes made on your behalf. Here are a few situations where a little outside help sometimes leads to big headaches.

    -Medical billing and insurance. It is common for a medical provider to bill your insurance company for you. However, this does not mean that you are not responsible for the bill’s payment. You are responsible for the debt even if the bill doesn’t get submitted, is submitted with an error, or (for whatever reason) is not paid by the insurance company. If you do not pay the bill in a timely manner, the medical provider can report the delinquency to the credit bureaus and begin collection efforts. In some cases, it is smart to pay the bill and then try to get reimbursed from your insurance company.

    -Vehicle trade-in. I just read an article from the Associated Press about an increase in the number of consumers who are left on the hook for used-car loans that dealers were supposed to payoff. When you trade in a car with a balance still owed, the dealer may offer to take care of the outstanding loan for you. If that doesn’t happen and the dealership folds, lenders can then go after you for the balance owed or repossess the car from its new owner. If you are trading in a car, pay off the loan first if at all possible. The other recommendation from the article is to deal only with dealers who are less likely to go out of business.

    -Co-signing. Beware if you are on a cosigned loan that the other borrower has offered to “handle.” It is dangerous to presume that the other borrower is doing as they promised. As a cosigner, you are 100% responsible for the debt’s repayment. Any late payments will appear on your credit report; this is true even if you were unaware that late payments were being made. To be on the safe side, it is best to make payments yourself and then try to collect any money owed to you from the co-borrower.

    -Divorce decree. While a divorce decree is extremely important document, is unlikely that creditors will honor its arrangements. The divorce decree is between you and your spouse and not your creditors. Your creditors are not involved in this settlement and have no input on the results. Consequently, the contracts you and your creditors have cannot be changed by the divorce decree. The ideal solution is to pay off any outstanding debts and start over. If this is not possible, visit with an attorney to discuss your rights and responsibilities before taking it for granted that you are not responsible for a debt.

    Bottom line is that my 4th grader’s favorite “naughty” saying is true in some cases:
    When you assume, you make an ass out of u and me.

     

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