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question on loan guarantorHave you been asked to act as a guarantor for someone’s loan? Are you wondering what a loan guarantor does?

Of course, we will answer your questions regarding this subject in this blog post. But, first, let me tell you that being a loan guarantor takes some balls. It’s a must to weigh the consequences of taking this role, especially if you don’t fulfill your obligations of being a guarantor. One of these risks is hurting your credit score. 

You’re in the right place before making your big decision: to be or not to be a loan guarantor? Here’s a guide to help you regarding this matter. 

What’s the Responsibility of a Loan Guarantor?

If everything goes smooth - which means if the borrower pays his/her debt on time - the guarantor does nothing at all. The role of the guarantor, after all, is to guarantee that there’s someone who’s going to pay for the loan if the borrower doesn’t or can't pay it. 

In the case of the borrower missing payments or defaulting on the loan, the passive role of a guarantor turns active. He/she will now shoulder the failed obligation of the borrower. Based on the contract, the lender may request the guarantor to continue making the payments for the loan.

The guarantor should follow the terms of the guarantee if the borrower misses making a single payment or the entirety of the loan. If the guarantor won’t continue paying the debt, his/her credit score will get dragged down. That’s the harsh reality of being a loan guarantor. 

Why a Lender May Require the Borrower to Have a Loan Guarantor?

A lender may ask the borrower to get a guarantor for the loan for various reasons, namely:

  • The borrower hasn’t experienced borrowing money in the past (no credit history).
  • The borrower has bad credit or a history of missing payments. 
  • The borrower doesn’t have a sufficient monthly income required for getting the loan. 
  • The borrower owes other debts. 

Who Can Be a Loan Guarantor?

While lenders may differ in setting their requirements for a loan guarantor, we can nevertheless list down the most common of these qualifications. 

  • A would-be loan guarantor has to be 18 years of age and above.
  • A would-be loan guarantor needs to have a good or excellent credit score. 
  • A would-be loan guarantor must have a full-time job and meet the required monthly income. 
  • There must be proof that the would-be guarantor and the loan applicant aren’t married or have shared financial accounts. 

Is It Possible for a Loan Guarantor to Back Out of the Agreement?

As long as you haven’t agreed to any contract yet, you’re good to go. But once you have signed the terms of the guarantee, you can’t back out from your obligation. Thus, it’s crucial to think about it carefully before you decide to be a loan guarantor. You need to consider these questions below to help you make a decision. 

Can You Afford to Continue Making the Payments If the Borrower Can’t?

A loan guarantor must be financially confident in acting for this role, if not to say lots of guts. Think about the worst-case scenario. If you’re going to make the payments that the borrower failed to do, you should make sure that you can afford them. Also, take into account your other essential expenses, such as food or mortgage. 

Do You Know the Risk to Your Credit When You Miss Payments as a Guarantor?

Your credit won’t get affected by you simply being a loan guarantor. However, when the borrower can’t pay back the loan and you need to shoulder the obligation and you also fail to make payments, your credit score will get negatively affected by your action. So, always ponder this scenario before deciding to become a loan guarantor. 

Are You Aware That Your Assets Might Get Repossessed?

Besides hurting your credit score, the lender has the right to take legal action against you and repossess your house or other assets to cover the repayment on the loan. 

How Well Do You Know the Borrower?

You must know the borrower you’re guaranteeing. Make sure that he/she has the capacity to pay back the loan. Check his/her monthly income, assets, and financial resources. Moreover, you have to ensure that the borrower is serious about repaying the debt. You can’t just be a guarantor for someone’s debt if you don’t know that person well. 

Takeaway

Being a loan guarantor is a serious matter. If someone asks you to guarantee his/her loan, you must be aware of the responsibility and the consequences that come with this role. Keep in mind that you have to pay back the borrower’s debt if he/she failed to repay it. Moreover, if you can’t fulfill your obligation, your credit will get affected and the lender might repossess your assets to cover the payment for the loan. 

Author Bio:

Bree Diaz is a blog writer who tackles topics surrounding personal finance. She is well-versed in consumer loans such as secure online payday loan and guarantor loans. Bree is also a hiker and a dog lover.

house flipping Loans jpgHouse flipping has never been hotter. If you've been thinking of getting into flipping houses in retirement, there are some key points you should know to help your venture be a successful one.

if you’re thinking about making some money with house flipping, check out these tips:

  1. Find Quality Properties

Flipping houses is about making money, so finding the right properties is imperative. You want something in a good neighborhood that is close to schools and has a low crime rate. Consider areas that are up-and-coming but are not the priciest locales so that you won't have to pay steep taxes for the period that you own the home.

Experienced home buyers know to avoid homes with serious issues, such as cracks in the foundation, plumbing problems, electrical issues or widespread mold. A lack of adequate bathrooms is also a deal breaker for many homebuyers. For a small home, one to one-and-a-half bathrooms may be fine, but for bigger homes, more bathrooms are necessary if prospective homebuyers are going to even consider looking at the property.

Find properties that have good bones but could benefit from some updating. Things like fresh paint, new flooring, modern appliances and hardware, and refreshing landscaping can make big differences, and as Cheatsheet points out, these upgrades come with low costs.

  1. Finance Intelligently

If you have the money to purchase homes to flip outright, you can. There are benefits to having that kind of cash when flipping houses since many that can be bought for cheap in auctions require cash. If you don't have your own funding, though, getting a loan is an option.

Using hard money. Hard money loans are more costly than traditional loans, but they have their perks. They aren't based on the borrower's ability to pay back the loan or credit history. Instead, the loan is based on the collateral the loan is being used for.

Because hard money loans don't have the requirements typical to traditional home loans, they can be used for homes in disrepair. You can borrow the amount that the home is estimated to be worth once you've flipped it, so you have money to complete the repairs you need. They also are speedier than a conventional loan since there is less red tape. This is especially important because the longer you pay on the loan, the less money you earn on your flip.

  1. Know When to Outsource

Finishing the project as quickly as possible is vital to making money flipping houses, so learning to outsource when it's beneficial is vital to your success. This means engaging professionals to complete work that you aren't entirely sure how to do well yourself. It may seem costly in the short term, but if it saves you time and gets the project done in a professional manner, it is worth it to make the investment. Furthermore, Bob Vila notes that if you want to make flipping houses a business, there are often repairs beyond your expertise. Plus, you won't be able to complete all of the repairs yourself simply because the time won't be there.

Outsourcing isn't limited to home repairs and landscaping, though. If you are using contractors and other employees, you'll need to set up payroll for them. Luckily, there are online services that can take on the burden of payroll for you. Research options to see one is right for you, paying special attention to perks that might be beneficial to your business, such as direct deposit options and automated taxes. Some payroll services even allow you to set payroll to run automatically, so your workers never miss another payday. This will keep contractors feeling motivated to get the job done.

Flipping houses can be a lucrative and satisfying business to be in. Find the right properties, fund them wisely, and know when to delegate to other professionals; you'll be a successful flipper in no time.

Blog writen by Emma Grace Brown

 

Using credit cards have added a level of convenience that many fail to appreciate.  Would you rather have to carry $300.00 in cash to purchase that new lawnmower or just carry a small plastic card in your wallet?  Now we don’t even have to carry the plastic and can pay with through an IPhone.  One downside to this convenience is the likelihood of getting into too much debt.  Getting too many credit cards can become an invisible way of getting into debt.  Whereas when people needed to pay cash, they paid from what was in their bank account or had to go through the conscious trouble of applying for a loan.

multiple credit cardsIf Experian data is correct, the average American had almost four credit cards during the thirds quarter of 2020.  This was an improvement or a reduction on the number of credit cards consumers held in 2019.  So then what is the appropriate number of credit cards one should have? You’ll have to decide based on your finances and credit objectives, but, here are some pros and cons.

Being able to use more than one credit card makes it easier to split expenses amongst them.  This reduces the percentage of the available balance you is being used on any single credit cards.  This lower credit utilization when kept low may help your credit score.  For instance, say you have a major purchase, like a $300.00 lawnmower, in addition to your regular expenses.  If you had one credit card, the $300.00 for the lawnmower would increase the percentage of the available credit limit that is being used.  This may affect in a negative way the credit score.  But, with two credit cards, one may be used for regular expenses and the other to purchase the lawnmower. 

With multiple credit cards you can also maximize the rewards that the credit companies offer.  If one credit card gives three percent cashback rewards on supermarket purchases only and another gives two percent on gasoline, then you can split how you use them. 

Some credit cards also send offers you can take advantage of.  Back to the $300.00 lawnmower, you can search for a credit card that offers several month same as cash repayments instead of using the regular credit card used for all other expenses.  As long as the lawnmower is paid in full before the same as case payment period expires, you will save money by not paying interest.

But what could go wrong with having multiple credit cards? 

Lack of discipline can lead to having too many credit cards and too much debt.  If you have a history of overspending, it may benefit you better to just have one credit card that can keep an eye on.  Some credit cards make it too easy to open accounts.  Self control is vital.

Having too many credit cards can also make it difficult to remember when payments are due.  Next thing you’ll see late fees being added to the bill.  If you are not an organized person, for the sake of not getting stuck with late fees, stick to one credit card.

Also, remember that when a credit card company opens an account it may run a hard credit on you.  This will have a negative effect on your credit score.  So to keep your credit score on the high side, it is best to keep the number of credit cards you have to a minimum.

As mentioned, there is not written in stone way of telling how many credit cards you should have.  But, do take into consideration the points mentioned.  Hopefully it will keep the financial pain at a minimum. 

Some of the points on this blog were derived from a blog by Ben Luthi at Experian’s website, https://www.experian.com/blogs/ask-experian/how-many-credit-cards-should-i-have/.

Saving money to buy a home can be difficult when you're also working to pay off debt. Whether you owe on student loans, previous mortgages, personal loans or any other type of credit, these tips will help you pay off your debts and accomplish your goals.

RESEARCH MORTGAGES

If you plan to buy a home, you should first research the types of mortgages available to you to help determine how much money you need to save. In addition to picking the type of mortgage that best fits your needs, you will want to look for a loan with a low interest rate. This will reduce the total amount of money you pay over the life of your mortgage.

One way to lower your mortgage's interest rate is to pay discount points upfront. In other words, the borrower can choose to pay the lender an additional percentage of the principal amount, known as a point, at the time of closing. Each point will reduce the interest rate by an amount determined by the lender. This in turn lowers your monthly payments. Depending on your loan, your finances and the length of time you plan to own the home, this may be a great option for you. You can use a mortgage points calculator to help determine if it is a good choice and how many points you should pay.

CREATE A BUDGET

A budget should serve as a roadmap that helps you know what you can spend without stretching your money too thin. Knowing how to make a budget is a crucial skill when trying to pay off debt, save money and cover monthly expenses. You should start with your monthly income after taxes and deduct required fixed expenses, such as rent and payments towards loans. Then, you should deduct the average amounts you spend on required variable expenses, such as utility bills and groceries.

Once you've subtracted all of the expenses you must pay and determine how much money you have left, decide how much of that amount you can put into your savings account each month. Next, you can list out payments that are not necessities, such as gym memberships or subscriptions to websites, and determine what you should keep paying for and what expenses to cut from your budget to save money. You can use the remaining money to increase loan payments, increase savings, create an emergency fund or invest.

MAKE REGULAR PAYMENTS

For any type of debt, you should be making fixed monthly payments and making sure you are paying towards the principal and interest. Each loan is comprised of two parts: principal and interest. The principal is the amount that you actually borrowed. The interest is the extra percentage that you pay to the lender so that they can profit off of loaning you money.

Many people make the mistake of simply agreeing to the minimum monthly payments and not looking at where their payment is really going. If all of your payment is going towards interest, the principal amount is not decreasing. You should look at your monthly statements to make sure you are reducing the principal and not just the interest rate. This will help you pay off your loan much faster and greatly reduce the amount of interest you pay over time.

If the sum of your individual loan payments are overwhelming and don’t allow you to pay more towards your balance, you may want to look into consolidating them with a personal loan. This can reduce your interest rate and monthly payment amount, allowing you to pay the balance more quickly and save more money. In many cases, you can even apply for a personal loan online.

Paying off your debts and saving enough money to buy a home takes planning, hard work and research. It may seem like a daunting task, but it is worth it in the end.

Article written by Emma Grace Brown

Image source: Pexels

Being out of work can be stressful, but there are some ways to make money on the side while you look for a new job. Along with working side jobs, you can find new ways to save money each month to help you plan for the future. Use this guide for advice on making ends meet and staying afloat while between jobs.

The art of the side hustle

The COVID-19 pandemic has been devastating to some industries such as hospitality, entertainment, and travel. If you worked in one of those industries and you’re out of work, it may be necessary to find a new way to make money. Consider what strengths you have that could allow you to make money on the side, whether it’s writing, caring for animals, or tutoring students.

If you like to write, you’re in luck: there are countless writing gigs you can get online. The challenge is in finding opportunities. One great way to connect with potential clients is through online job boards and freelancer websites. You can create a profile, set your rates, and bid on projects that appeal to you. If you have a client that you work well with, it could even turn into a regular gig.

For people who are good with animals, it’s possible to make money walking dogs or pet sitting. There are a few handy apps out there to help dog walkers connect with pet owners, so do some research and apply online. Or if you’d rather go at it alone, you can start advertising your services on local neighborhood forums or social media groups.

Tutoring is another side-hustle option, especially if you’re good at a particular subject. For example, if you’re a math whiz, you can start tutoring students of any age online. Tutoring can be perfect for those who want a flexible schedule and want to form connections with people.

Starting a business

If you generate enough clients in your side hustle to sustain you long-term, it might be worth looking into starting your own limited liability company or LLC. An LLC is a useful business structure because it allows owners to protect their personal assets and gain some tax advantages.

You can form an LLC in Ohio on your own or hire a formation service to help you. Just be sure to check the regulations in your state to ensure you’re following the necessary requirements for business formation.

Revamp your budget

Along with earning extra money, it’s a good idea to revamp your budget so you can curb unnecessary spending. Many people spend far more each month than they realize, and without a budget, it can be hard to reign in the extra spending. Create a budget to help you plan for every expense, and keep track of your spending so you can find new ways to save.

Along with allowing you to save money each month, budgeting also allows you to save for the future. Once you determine a few ways to save on your monthly spending, you can create savings accounts to put away money for bigger purchases or an emergency fund. The pandemic has illuminated the need for emergency funds, so do what you can to put aside money for a rainy day, if possible.

Even if you’ve been out of work for a while, it’s still possible to kickstart your earnings with a side hustle. Whether it’s writing, dog walking, or tutoring, side jobs can help you get back on your feet financially and will help give you confidence as you rejoin the workforce. Be sure to adjust your spending habits with a new budget and put away money when you can for emergency funds.

Writen for America's Loan Company by Emma Grace Brown

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Customer Notice: Personal loans, title loans, and car loans have terms 6 months or longer. There are no early payoff penalties. We currently report to one of the 3 major credit bureaus, TransUnion. However, many factors affect your credit score. Therefore, we can't promise that your credit score will improve while having a loan with us.

Requirements: We are able to service Ohio residents only. Approval depends upon meeting legal, regulatory and underwriting requirements. America's Loan Company may, at its discretion, verify application information by using national databases, including but not limited to Teletrack and any of the national credit bureaus. America's Loan Company may take this information into consideration in the approval process. Due to state and verification requirements, not all applicants for loans may be eligible for approval by America's Loan Company. You may be required to submit additional documents due to state law and qualification criteria.

Products & Services: Products and services offered to customers may vary based on customer eligibility and applicable state and federal law. Actual loan amounts vary. The availability of loans and extensions may vary. Auto loans and secured personal loans are subject to minimum auto value requirements.

Further Personal Loan Disclosures: For qualified customers, America’s Loan Company offers bad credit personal loans with terms of 6 months to 5 years, with APR under 35.9%. As an example, you may borrow $1,500.00 over a 24 month period, with a $10.00 credit investigation fee, $100.00 loan origination fee, and $452.32 in interest, for a total payment of $2062.32, with an APR of 32.6514%, and monthly payments of $85.93.

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