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Cash-Out Refinance vs Home Equity Line of Credit
Cash-out refinances and home equity lines of credit are two borrowing options that allow homeowners to tap into the equity they have built in their home. A HELOC is a line of credit secured by the borrowerâs home. The line of credit can be accessed on an as-needed basis, up to the borrowing limit. The […]
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Get a no-closing-cost mortgage and a low rate, too
A no-closing-cost refinance or home purchase saves you money upfront But your rate will be higher. Learn when a no-cost mortgage is a good idea.
When Should You Start Looking for a House?
The short answer: Immediately. That is, if you want to buy a home at some point in the next year, or any time thereafter. Weâll get into the specifics in a moment, but thereâs really no sense in waiting if you want to own a home or condo because itâs always going to be a [&hellip
The post When Should You Start Looking for a House? first appeared on The Truth About Mortgage.
What is Dash Cryptocurrency?
Cryptocurrency can sometimes be confusing to beginners because there are so many different cryptocurrency types with different purposes. Some cryptocurrencies are designed to act as fast digital cash, others as private digital cash, some as interest-bearing assets, others as cross-currency exchanges, and more. (Beginners can check out our comprehensive crypto guide for more details.) Bitcoin […]
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Should I Move the Money in My 401(k) to Bonds?
An employer-sponsored 401(k) plan may be an important part of your financial plan for retirement. Between tax-deferred growth, tax-deductible contributions and the opportunity to take advantage of employer matching contributions, a 401(k) can be a useful tool for investing long … Continue reading →
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Peer-to-Peer (P2P) Lending – What It Is & a Guide to Investing
Citi Flex Plan: What It Is and How It Works
Citi Flex Plan allows cardholders to access their credit cardâs line of credit in new ways, besides the usual purchases at stores and online merchants. Cardholders can essentially use theirâ¦
Why Everyone Over 30 Should Start Thinking About Life Insurance
Why Everyone Over 30 Should Start Thinking About Life Insurance is a post originally published on: Everything Finance – Everything Finance – Its all about Money!
I donât like to make generalizations too often, but I do feel that everyone over 30 should start thinking about the importance of life insurance. That is, if youâre 30 and over and donât have any life insurance. No one likes to think about their demise, but life insurance is an extraordinary product that can be used to reduce the financial burden you could leave behind for loved ones. Plus, different types of life insurance can even help you build wealth and diversify your assets. Here are 4 important reasons why everyone over 30 should start thinking about life insurance.
Why Everyone Over 30 Should Start Thinking About Life Insurance is a post originally published on: Everything Finance – Everything Finance – Its all about Money!
How Cosigning On a Student Loan Could Impact Your Finances
While college students can get their own federal student loans without a cosigner in most cases, there are some situations where a cosigner is required. Federal Direct Parent PLUS loans, for example, can actually be taken out on behalf of dependents to help pay for higher education. Students can also apply for private student loans to pay for college. These loans tend to have high credit requirements that make it difficult for young people to qualify on their own.
But should you really cosign on student loans for your child? And should you cosign on any loans they can’t qualify for on their own? You can certainly consider it, but it helps to enter the situation with eyes wide open and understand all the pros and cons.
The main advantage of cosigning is the fact that you’re helping your child (or dependent) pay for higher education when they may not be able to otherwise. However, it can also be a huge risk. Here’s everything you need to know before you sign on the dotted line.
You’re obligated to repay the debt no matter what
Whether you take on a Parent PLUS loan or you cosign with your child for a private student loan, the first thing you have to understand is that, no matter what, you’re obligated to pay that debt back. If your child stops making payments, you’ll be required to make them. If your child flat-out refuses to get a job and completely defaults on their responsibilities, you will need to repay that loan.
Cosigning on a student loan is similar to buying a house with someone or cosigning on a car loan. You’re both jointly responsible for repayment regardless of what the other person does. That can be a huge problem if your child doesn’t take their bills very seriously, but it may not be an issue if they treat their credit with care and stay on top of their bills.
Student loans are almost never discharged in bankruptcy
Another detail to understand is the fact that student loans are rarely ever discharged in bankruptcy. For the most part, they’ll stick around forever unless the borrower dies or you can prove you have some inescapable hardship.
As a parent, you’re probably trying to save for retirement and reach other financial goals, so it’s important to understand that the student loans you cosign for will never go away until you pay them off — once and for all.
There’s no going back
When you cosign on a student loan, you can’t just change your mind and back out of the deal. Your child may be able to refinance their student loans in their name, but only if their credit score is good enough to qualify for student loan refinancing on their own. And if that was the case, they wouldn’t have needed a cosigner in the first place.
Your finances may be perfectly fine right now, but you should think through how they may be in five or 10 years. If you’re nearing retirement, you may not want to put yourself in a situation where you’ll be stuck paying off a child’s student loans. Plus, you never know how your health will be or the status of your career several years from now. Cosigning for student loans leaves you on the hook no matter what, and it’s hard to change that after the fact.
Cosigning on a loan could affect your credit score
When you cosign on a student loan, you have to remember that you’re jointly accepting responsibility for the debt and any consequences that arise out of late payments or delinquency. So you should only cosign if you know your child or dependent is dedicated to paying their bills on time and avoiding default at all costs.
If you’re not paying attention, you could easily take a huge hit to your credit score without even knowing. Since payment history makes up 35 percent of your FICO score, it’s easy to see how even one late payment could cause major damage. Just think of what could happen if the student loans you cosigned for were paid late month after month. If you’re not also receiving a bill in the mail, you may not find out until the damage is already done.
The bottom line
There are situations where it can make sense to cosign on a student loan, but this decision should never be taken lightly. You may be helping your child earn their degree, but you’re taking a significant risk. (See also: Should You Co-Sign a Loan?)
You may want to assess the career field they plan to enter into and figure out how much they might earn upon graduation before you cosign. Some fields have plenty of promise right now, while others offer almost none, and you should know either way before you make any type of financial commitment. Maybe your college student could even spend time improving their credit score so they can qualify for student loans on their own.
Cosigning on student loans should be a last resort for parents, not an easy fix for students who don’t take time to consider all their options.