Definitions Explained: Collateral, Down Payment, Co Signer
Posted on October 8, 2008
Filed Under Auto Loan, Business Loan, Construction Loan, Home Loan, Mortgage Loan, News Update, Secured Loan, car loan, loan, personal loan, student loan | Leave a Comment
Loan terms come in great numbers and it seems that whoever came up with them tried very hard to be as confusing as possible. Some of the greatest confusions regarding loans is when it comes to
" collateral
" down payments
" and co-signers
Each of these is important and they all have something to do with getting a loan, but do you have any clue about them beyond that?
Collateral is personal property that you use to secure the loan. That means if you default you give it to the lender. On a car loan the collateral is the car and on a mortgage it is the house but for other loans there might be valuable collateral required.
A down payment is money you put up for the loan at closing. The down payment is like a very large loan payment made before you even get the loan. This applies to many loans for houses and often for vehicles as well. If you have stellar credit you can sometimes get away without the need for a downpayment.
A co-signer is someone you know who also signs the loan agreement and agrees to be responsible of the loan if you default. If your credit is less than perfect a co-signer might be required.
All three can help you get a loan approval and reduce the interest rate on the loan.
How A Checking Account Can Equal Approval For A Loan
Posted on October 7, 2008
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You may be wondering how can a checking account get you a loan. Well, checking accounts are a great asset. Think about it. You can have your paycheck direct deposited into the account and you can have payment debited directly from the account.
This means a lender who sees you have good employment can set up loan payments to be automatically debited each month. As long as your checking account has been in good standing, a lender may decide that despite credit issues or other weaknesses in your loan application that you qualify for a loan.
Having your pay deposited in your account is sometimes reason enough to qualify you for a small loan that can help your credit standing. A solid employment history and direct deposit into a checking account can be enough to qualify you for a credit rebuilding loan.
There you have it. Your checking account just got you approved for a loan. It is something worth checking into when you apply for a loan because it really does work. Lenders want reliability and your checking account is standing proof that you are reliable. If you're having trouble getting approved, look at being as responsible as possible with your checking account and try again when you look better on paper.
Best Assets for Collateral
Posted on October 6, 2008
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Lenders will not take just anything for collateral. The whole point of collateral is that you are putting something up that is worth money. The lender prefers that the collateral is worth a good amount in comparison to the loan. This way if you default they can get back the majority of their money by taking possession of the collateral.
Fixed assets are a lender's top choices for collateral. Fixed assets are assets that will not go down in value over time and most often even go up in value. Lenders tend to like these items because they offer the bigger pay off.
Other assets, like vehicles, go down in value over time and are not as valuable for a lender. With that in mind, when you need good collateral for a loan you should look to fixed assets first. You will have a better chance for approval with this type of asset.
Think You Can Wipe Out Your Loan By Going Bankrupt? Not So Fast!
Posted on October 5, 2008
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Bankruptcy used to be the solution to ALMOST all financial woes. A person used to be able to just file bankruptcy and usually they would be approved to do so with little hassle. However, times have changed.
New bankruptcy laws now put a lot of limits on bankruptcy. You should probably understand these limits if you are considering bankruptcy and have any loans in default.
Student Loans
One type of loan that you can not write off in a bankruptcy is a student loan. You will not be able to wipe out student loan debt at all. The only way to get rid of it is to pay it off. If you're in default on a student loan, talk to your lender. They will typically be very helpful at helping you get back on track.
There are other loans which may also not be wiped out by bankruptcy. You really should check into the rules before filing if loan debt is a concern for you. Read the fine print of all loans and talk to your lenders when you have financial difficult.
Bankruptcy should not be a financial solution. It should only be used when absolutely needed and misuse of the system caused law reform so be sure you understand your rights and your responsibilities with loan debt.
Debt Consolidation Woes
Posted on October 4, 2008
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Debt consolidation is a great plan in theory. You just have to be careful about our debt consolidation choices. There is a big issue that you have to think over before you go and get a debt consolidation loan.
What To Watch For
The whole point in debt consolidation is to make it easier for you to pay your debts. The problem is that often a debt consolidation loan can lead to further issues and financial problems.
The biggest problem is that a debt consolidation loan can cost you more money and fees. On top of the interest you are paying on your debts you might have fees and high interest on the debt consolidation loan.
You have to consider if the loan is actually the best option. In reality you could be racking up more debt just so you can make a lower monthly payment. You have to decide if the trade off is worth it.
You also need to stop yourself from falling into old traps. Don't consolidate your credit cards unless you plan to cancel the accounts otherwise your debt ratio will climb higher than ever.
Collateral May Not Be Enough
Posted on October 3, 2008
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A lot of attention is given to collateral in the loan process. That is because collateral is a really good selling point to the lender, but sometimes collateral is not enough.
In the case where the collateral offered is not worth much compared to the loan amount or where the lender just wants more security, collateral does not cut it. You are going to need something more.
This is where you can offer a down payment or a co-signer. A down payment is nice for the lender because it takes money off what you will owe them and shows a level of responsibility from your side. Large down payments can sometimes be even better then collateral.
A co-signer is extra security for the lender. Having someone else sign the loan means there are two people the lender can rely on to get their money and usually a co signer needs excellent credit in order to qualify.
The point is that you should not go into a loan deal with just collateral to offer. The more you have to offer the better chance you will have at getting the loan.
Don't Let Terms Get You Down
Posted on October 1, 2008
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Loan terms look like a tangled mess sometimes. It can seem like a hassle to try to read all that fine print. It is a big mistake, though, to not read a loan contract.
Many people believe that defaulting on a loan means only missing a payment. That is not true. Defaulting on a loan technically means failure to meet the terms of the loan agreement, which does include payment, but also much more.
You have to make sure that you clearly understand all of your obligations under a loan. Do not sign a contract if you are unclear about anything.
Bad terms can really get you down and cause you a lot of trouble. If you do not agree with every term of a loan contract then do not sign it.
The money is not worth the trouble that will come back to haunt you if you default so be sure you know what you are signing up for!
Get Ready To Have Your Character Questioned In The Loan Approval Process
Posted on September 30, 2008
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The whole loan process is all about a lender determining if you are a good person who will pay back your loan. They are looking for a couple of things to help them really determine your character.
Character is your main selling point when it comes to getting a loan. You have little control over the other aspects of qualification, like credit, because you can not do a quick fix to make it all look good. Character, though, is directly in your control.
You have to be honest and upfront with the lender. You have to show them you really are a good person and make them like you. You have to put your best foot forward and display a sense of integrity and an overall legitimate need for the loan as well as exude trustworthiness so your lender knows you'll make it a priority to pay them back.
Shape your character to be the best possible and you will really help yourself secure that loan you want.
Tips and Tricks For Getting an Unsecured Loan
Posted on September 28, 2008
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If we are being honest, the best way to get an unsecured loan other then a payday loan is to have perfect credit and some nice collateral. However, there is another trick that many people do not know about.
The trick to getting approved for an unsecured loan is being a good business partner. It starts with getting a savings account with a lender. You keep money in your account and show you are responsible by putting in money regularly and always keeping the balance over the minimal required.
Once you get to a certain amount in your savings you can either move it to a larger account or use that savings account as collateral for your loan.
You do not use the money as a down payment, but rather as collateral. So in effect you get to keep what is in your savings and gain interest on it, while also getting a loan.
Try it out and see if it works for you. You may be surprised at how well it works at getting the loan deal you want!
Spotting Loan Scams
Posted on September 27, 2008
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It seems in every industry there is some type of scam. The loan industry has not been lucky enough to dodge scams. You have to be smart so that you do not fall prey to a scam lender.
Scam, then Scram
Scam lenders like to prey on those with the greatest need. If you are someone who is not likely to be approved for a loan then you appear to be an easy target. Scam artists prey on people with bad credit and who are low income.
What these scammers do is promise a large loan, but they want a fee paid up front. They say this is to secure the loan. They try to talk up the fact that it is something all lenders do.
This is not true.
Lenders may charge fees for application filing and such but you always know where the money is going and it is never paid to get you the loan. In the case of the scams if you do not pay then you do not get the loan.
You should just play it smart and always stick with lenders you know and can trust. Always research a lender you find online or in classifieds to be sure they are an accredited financial institution.