How Guarantor Loans can work for you
Posted on 14. Dec, 2009 by Stuart in Loans
Guarantor loans are loans where the funds go to one person but guaranteed by someone else; guaranteeing a loan means that a person promises to be responsible for paying the loan off if the individual receiving the funds cannot.
Individuals seeking guarantor loans often cannot get a loan on their own because of poor credit history or a lack of a credit history. As such, young people or those rebuilding their financial situations after divorce or the death of a spouse are most likely to apply for a guarantor loan. These people need someone with good credit to volunteer to pay the loan off if the debtor is unable to make the obligated payments.
Guarantors take all of the risk in a guarantor loan situation; the person they are signing for gets all of the money. There are situations, such as a parent and a child, where this is common, but situations with business partners or siblings can be a bit more complicated. In these loan situations, the guarantor often has to put up something as collateral to secure the loan; a home or a vehicle, for instance. If the debtor cannot make the payment, then the responsibility falls to the guarantor. If the guarantor fails to fulfill the financial responsibility, the lender can take the collateral property as compensation for their repayment.
Pretty much anyone can be a guarantor, but most often, it is a family member; friends, colleagues, or anyone who has a trustful relationship with the debtor can sign on a loan. For those individuals, it is essential that they understand their rights and responsibilities as a guarantor. For example, it is vital to the agreement that the person signing as guarantor completely understand the consequences if the debtor is unable to pay the obligation. It is equally important that the guarantor and debtor understand that the guarantor, at any time up until the lender receives the entire repayment, can choose to revoke their position, at which time the debtor may be called upon to repay the loan in full immediately. If, for some reason, the guarantor refuses to repay the loan, the lender can take them to court and the court can order the person to pay the loan back.
In guarantor loan situations, the lending institution believes the debtor’s guarantor would not be willing to put their situation on the line if they did not believe the person was responsible enough to handle the repayment; as such, oftentimes these loans do not require collateral, and the lending institution will not do a credit check on the debtor. Both parties need to fill out the lending institution’s application forms and complete their unique application processes, and then find out the outcome of their approval. It is entirely possible that the lending institution will run credit checks and other measures of financial reassurance on the guarantor, but the debtor most likely will not have to go through this process.
If the guarantor is unsure of the debtor’s reliability, they can have the debtor sign an indemnity. This contract requires the debtor to repay the guarantor, should the guarantor have to pay the loan back to the lender on behalf of the debtor. Again, should anything go awry, the court could settle the matter and order the responsible party to pay.
Many lenders offer guarantor loans, and that is a positive thing, as it can be difficult for individuals to get back on financial track or begin to build their credit. Guarantor loans are a reasonable route to take when in such a situation, but one that requires entrance with a large amount of caution and careful thought. Any time two individuals are entering into a loan situation where one person is responsible for the abilities, or inabilities, of another, personal relationships and financial situations are at stake. Guarantor loans can work, if both parties handle the situation responsibly.
Photo source: TheTruthAbout…
Are Military Payday Loans Illegal?
Posted on 07. Dec, 2009 by Stuart in Loans
Military payday loans, like all payday loans are small loans ranging from $300.00 -$1,000 that are usually re-paid within two pay periods after its receipt. The purpose of a payday loan is to offer financial assistance to consumers who temporarily need access to money for emergencies.
Payday loans are relatively easy to obtain (Credit checks are not required and most people qualify if they have a checking account and income). Consequently, for this convenience, payday lenders charge higher fees that equate to several times the original loan amount.
Payday lenders require customers to write a personal check to the lender for the amount the customer wants to borrow, plus the fee they must pay. The lender gives the customer the money, or electronically deposits the money into the customer’s checking account, and holds the check until the customer’s next pay day.
Customers may choose to have the check debited on their pay day, or they may extend the loan by paying an additional fee. Although the initial fee may not seem costly, if a consumer continues to extend the loan the APR may exceed 300%. The APR is determined by many factors such as the length of the loan, the interest rate and fees, and the amount borrowed.
Until 2007, many payday lenders were located near military bases and targeted military personnel. Enlisted men and women were particularly vulnerable and easy prey for military payday loans because they earn low wages, and are detached from their network of family and friends. As a result, when an emergency arises, many cannot quickly borrow money from other sources. Consequently, they turn to military payday loans to help cover unexpected expenses. Problems began to arise when many military personnel were unable to repay these loans quickly.
The process of applying for a military payday loan and extending the loan became a cycle for many service men and women. This cycle, according to the Department of Defense, resulted in soldiers who were deeply in debt. As a result, their credit was ruined which threatened security clearances, and jeopardized their ability to be deployed.
In an effort to protect military personnel and their families, a federal law was passed to limit the power given to payday lenders when conducting business with military personnel.
Consequently, in 2007 Congress enacted the Fiscal Year 2007 National Defense Authorization Act. Although the law makes it less profitable to extend payday loans to military personnel, it did not make it entirely illegal.
In fact, as a result of the 2007 legislation, many payday lending companies still specifically target military personnel, but now the rules of engagement have been altered to fit the new law. Most military bases no longer have brick and mortar payday lenders anywhere near the bases. Much of the business is now done online.
Furthermore, when military payday loans are extended to military personnel and their dependents, lenders are required to include certain modifications to protect service men and women. For instance, after October 1, 2007, lenders cannot offer loans to military personnel with interest rates above 36%.
In addition, the 36% interest rate must include all fees associated with the military payday loan such as renewal fees and service charges. Requiring military personnel to provide a security deposit such as a personal check, access to a bank account or a car title is also forbidden
Lenders are also prohibited from unlawfully threatening military customers with legal action, or requiring service men and women to relinquish their rights under the Servicemembers Civil Relief Act through mandatory arbitration.
Finally, creditors must disclose all costs associated with the loan, and inform military personnel of their rights.
Offering a military payday loan is not illegal. However, there are strict guidelines payday lenders must adhere to when providing payday loans to service men and women. If the guidelines are not followed, the lenders may face prosecution resulting in fines or even imprisonment.
Photo source: nukeit1
Guide to Obtaining Family Loans
Posted on 29. Jul, 2009 by Stuart in Uncategorized
Family loans are a great option to help a relative through a tough financial time. Money that is lent from family members and not paid back, or not paid in a timely fashion can devastate the closest of family relationships. Doing some initial research on family loans and protecting your interests can help to protect your monetary investment. Here are a few tips on obtaining family loans.
The terms of family loans should be based on facts, not your emotions or assumptions. Ask for proof of your relative’s salary. It is easy to assume that you know how much they earn. However, basing payments that are too high and unrealistic to pay back is almost setting up your loved one for failure. Check with local banks or online for the current interest rate for personal loans. Learning the current market rate and cost to borrow money from a bank can help your loved one to not feel that you are overcharging them for the privilege to borrow money from them.
Most family loans are done by family members that can afford comfortably to lend the money. View the interest that you charge as your payment for helping out a family member. Even if you discounted the interest rate by one or two points, you would be helping your family member with decreased interest costs. Create a repayment schedule that is reasonable based on their salary and current financial obligations. For example if your family member earns $ 3000 a month, and $ 2400 of that amount is going to their mortgage, car payments, and utilities a loan repayment amount of $400 a month may make it hard for them to cover basic expenses.
Make it easy for the family loan payment to reach you. Set up automatic debit through their primary checking account. The preset agreed upon amount can be drafted from their checking account preferably on payday. Make the details of your loan legal. Have a respectable record of the transaction. This will make your actions seen legally as a loan and not a gift. Have your loved one sign and date the terms of loan. If you are doing an automatic payment for each monthly payment includes as much information as possible about the transaction. Have the form notarized with a notary or the notary at your local bank. If you are in different geographical locations have a respectable third party sign as a witness. This witness could be the family doctor, religious leader, church member, club member, or family friend.
Family loans that are set up properly can be handled outside of emotion. In the event there is a missed payment or an unauthorized change in the amount paid you can refer back to the printed terms of the loans. If you are the recipient of a family loan do all that you can to pay as agreed. Keep documentation that you paid each family loan payment. This record could be through bank statements, money order receipts, or a written receipt for handing over cash.
Make paying your loan payment a monthly priority. Have a yard sale, sell items on eBay, work a few extra hours at work, consign clothes, sell locally on Craigslist, baby sit, or do errands for the elderly in your neighborhood. Consider taking on extra work or selling items to set aside a few extra family loan payments. That way you will never have to fear not having the money to make the payments on the loan.
Try to pay the loan off as soon as possible. Earn an additional $25 a week to apply to the family loan that is $100 additional dollars you can use to get out of debt faster. Learn how to save money. For example if your grocery budget is $ 500 monthly try to save five to fifteen percent through Sunday coupons and weekly sales specials.
Use these family loan tips to either lend money or manage a family loan. Take time to research loan interest rates, loan terms, and document the agreed upon terms of the family loan. If you are the recipient of the family loan always view the loan as a courtesy extended to you from a loving family member. Respect the agreement by doing all you can to pay better than agreed to.
Photo source: quaziefoto
Remortgaging to Fix Credit Problems
Posted on 10. Jun, 2009 by Stuart in Mortgage, Refinance
One of the great things about numbers and economics, even on the level of your personal economic situation, is that there doesn’t need to be any physical change in circumstances to create a change in value.
For example, if share investors get their knickers in a collective knot (nice image, hey?!), and start to panic about the state of the market, company values go down. No physical change, only an intangible one – but a very real financial effect.
In the same way, you can actually go a long way towards fixing an adverse credit rating (which might be stopping you getting a car, a home, or any other type of loan), simply by doing a little paperwork. There hasn’t been a physical change in circumstances for you – but now you are able to get a loan, where you couldn’t before. It’s like some sort of magic!
One usual way this works is that you would approach a lender other than your own (often through a mortgage broker), to buy your mortgage from your current bank. That is the ‘remortgaging’ part – you’ve just re-created your mortgage elsewhere.
If you have a bad credit rating, you may be able to have your new lender loan you the entire value of your home, including any repayments you have already made, using the property itself as security (just as you did at the start of the mortgage). This allows you to pay off whatever debts were being mean and nasty to your credit rating to begin with.
Remortgaging mat also allow you to reduce your monthly repayments, especially if you used to have a bad credit rating, but it has improved since you took out your home loan. Typically, lower credit scores for applicants translate to higher interest rates for your loan. If your credit situation has changed, remortgaging could save you hundreds or thousands of dollars in repayments per year.
Taking out a bad credit mortgage usually offers you a lower repayment schedule (as the loan is at a lower interest rate), however it is taken out over a greater period of time. They aren’t really giving you sumthin’ for nuthin’ … your total repayments over the life of the loan will likely be bigger, since the term is longer. However, you do have a more manageable solution in the meantime… and you can always change your loan again when your circumstances change.
It is advisable that you use a mortgage broker to find yourself a bad credit mortgage, or any sort of remortgage. They can quickly and easily figure out the net gain or loss to you, factoring in early repayment fees, break costs, and different interest rates.
Mortgage brokers can also help you find the lender most likely to take you on – every time you apply for finance and are rejected, this goes on your file. Nasty, isn’t it! Specialist advice can help you jump over that little pitfall.
Don’t think of bad credit mortgages as free money or a catch-all, though. You’ll still need to:
• Provide proof of income and outgoings
• Have enough equity to cover debts that you are consolidating
• Be able to afford the new monthly repayments
Photo source: Rev Dan Catt
