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The Risks Of Co-signing for a Bad Credit Loan
Lenders who offer bad credit loans usually require the applicant to have a co-signer. Many people who have imperfect credit history ask their friends or relatives to help them get their loans approved by co-signing the contract.
Have you been asked to co-sign for someone? If yes, have you considered the possible risks involved with being a co-signer? Are you clear about what your duties and responsibilities would be as a co-signer? What can you to protect yourself as co-signer? In this article, lets answer these questions one at a time.
Possible Risks Associated with Co-signing Co-signing a loan for another person means that you guarantee that he/she is capable of the loans repayment. With this assurance, you agree to take over the repayment obligations in the event that the primary loan holder defaults.
Unfortunately some people immediately sign-up the contract without first reviewing the Terms and Conditions or without a clear arrangement with the primary loan holder. Take note that as a co-signer, your personal credit history can be damaged in case there are problems with the loan holders repayment.
Some lending companies will only try to get in touch with the co-signer after the primary loan holder defaults. However, the damage has already been done to your own credit. You may also be taken by surprise that you are now accountable for the loan holders debts.
Some co-signers also found themselves in the middle of a messy situation. By the time you need to apply for your own loan, you may find it difficult to get an approval. Lenders may see you as a “risky” client because you are already responsible for another loan. Although, it isnt directly under your name, you are still responsible for its repayment in case of default.
On the other hand, if the lender feels that you are still capable of taking on a new loan, you may get an approval. However, if your credit rating has been pulled down due to someone elses late payments, you may not qualify for the best rates from your lender.
Thus, the best advice to remember before co-signing a loan is to treat it as if its your own. If you are not sure whether you can keep up with its repayment, then it would be safer not to co-sign the loan.
Co-signer How to Protect Your Own Credit If you are willing to co-sign, the best way you can protect your personal credit and reputation is to closely monitor the primary loan holders payments. Request the lending company to send you a copy of the monthly notices or updates so you can be immediately made aware if the loan holder falls late with the payment.
Evaluate the Terms and Conditions with the loan holder. Make sure that the person you are co-signing for is clearly aware of his/her obligations. If you have any concern, dont be afraid to discuss the matter with your friend. Make an agreement with your friend and ask him/her to talk to you about anything that concerns the repayment. After all, it is your credit and finances that is also on the line.
How to Protect Your Home From Medicaid Reimbursement
All people wait for that red-letter day when they make their final mortgage payment. They look forward to owning their home without encumbrances. As long as property taxes are paid, their most valuable asset is safe. The property can be passed on to their heirs.
But let us not forget the Medicaid reimbursement official with a lien, ready to seize your treasured asset. Under the laws of most states they have the right to seek reimbursement for Medicaid payments. As long as you live in your home it is exempt from recovery. The moment you enter a nursing home, that protection is gone.
If you are married, your house will be exempted as long as your spouse lives in it. But if the spouse dies, the state can place a lien on your home. Then you can neither sell it nor refinance it without reimbursing the state for your Medicaid payments. If a situation arises where what you owe equals the equity in your house, your heirs will receive nothing from the sale of your home. To avoid such a situation, the following safeguards can be taken.
Obtain long term care insurance. It pays for in-home care like a stay in a nursing home or assisted living facility, so that Medicaid need not be resorted to. Statistics reveal that 69 percent of Americans who reach 65 will need long term care at some stage.
Gift your home to your children or loved ones. A lien cannot be imposed by the state on a home which is not yours. The gift has to be made more than 60 months before you enter a long term care facility. The recipient might have tax implications.
Your home can be transferred with a special power of appointment. The transfer could become effective immediately or after you die. If this is done, the state is kept away.
Consult an attorney who specializes in elder law.