Tag Archives: default
Homeownership Can Boost Your Approval Rate
Regardless of the loan type you are applying for, you can get a boost on your approval rate if you are a homeowner. Homeowners have better chances of getting approved for home loans, home equity loans but also for unsecured personal loans, student loans, car loans, business loans and many other loan types.
The reasons for this can be explained analyzing the effects that homeownership has on the loan terms and requirements for approval. There is a variable that is greatly modified by homeownership which has important incidences on all loan terms and requirements: the risk of default for the lender in the financial transaction.
Risk Of Default And Approval
The approval process is ruled by the lenders fear of default: The higher the risk of default, the lower the chances of getting approved. In the event of default, the lender is actually loosing his investment because there are little chances of recovering the money unless the lender has sufficient assets to compensate for the loses.
The risk of default and approval are thus, greatly related. If the applicant can provide any aid to reduce the risk of default, the lender will be significantly more comfortable at lending the money that the borrower needs. Thus, it is important to know which modifiers can reduce the risk of default and boost the chances of getting approved.
Consequences of Homeownership
Along these modifiers we can analyze various options: collateral, simple homeownership, down payments and a co-signer. Collateral provides the best form of guarantee as it is a particular asset that is used for security of a loan and the lender can take legal action of repossession in the event that the borrower defaults on the loan.
A down payment is useful for certain secured loans that already have collateral but the risk of default is still high. Then, the borrower offers a certain amount of money that has already been set aside by him, so as to reduce the amount of money needed to purchase the home or the car and thus, leaving the property with a higher amount of equity left. The property guaranteeing the loan is then worth more than the debt it is guaranteeing.
A co-signer is obliged to repay the loan along with the main applicant and thus provides an additional guarantee for repayment. This is also associated with homeownership. If both the applicant and the co-signer are homeowners, chances of getting approved are greater as the lender has additional properties to obtain repayment from in the event of default.
Finally, we have reached the modifier that can provide a great risk reduction without too many hassles. Simple homeownership provides a reduction on the risk involved in any financial transaction regardless if the property or properties are used as collateral for the loan. This is due to the fact that all of the applicants assets guarantee in a way the repayment of the loan. All the assets legally guarantee any debt that the owner may have and thats the reason why a co-signer who is also a homeowner provides an additional guarantee and lowers the risk even more: He does not only provide an additional income but also, an additional real estate guarantee or guarantees.
School Loan Deferments and Forbearance
Student loans are designed to be quite easy to pay off, but there are times when students simply can’t make the payments. Because student loans and school loan consolidation can make the balance of your loan add up, there may come a time when you have trouble meeting your required payment. In this case, it is important to take steps to protect your personal credit in order to build a financial future in the long term. It is never good to default on a loan, and it is even worse to default on a federally funded student loan.
When you can’t make your payments and student loan consolidation isn’t an option, you might want to consider a last resort. Gaining a deferment on your student loan is an excellent way to get a break. Many people have trouble paying back loans of all kinds, so lenders have developed this option to help. They are just as eager to get their money back as you are to pay it, so they will work with you in order to find a solution that works for everyone.
And important thing to remember about school loan deferments is that you can not apply for this type of help after you’ve already defaulted. If you feel like the burden of the student loan is going to be too much to bear, talk to your creditors before it gets to that point. Once you go into default, your credit will be ruined and there will be no deferment option to bail you out.
Deferments will allow you to put off the payments until a later time. Obviously, this will not eliminate your debt, but it will give you some room to breathe. There are fees and charges associated with putting off the repayment of a loan, but it is better to pay these fees than to have a large student loan go into default.
Before you get to the point where deferment is necessary, consider calling up a student loan consolidation company. If you have private lenders for the student loan, they can sometimes work with your lenders in order to lower the rates that you pay. In some cases, they can even help to develop a repayment plan to keep you out of default. This is an option that works for lots of folks.
If you aren’t comfortable with school loan consolidation, then forbearance is another option to strongly consider. As with deferment, this isn’t the most pleasant outcome to the problem, but it beats the alternative of defaulting on the loan. Like deferment, forbearance must be applied for specifically. Some cases will be granted and some will not. It all depends upon your lender and your circumstances. During forbearance, you payments are temporarily suspended or reduced for a certain period of time. This is usually more of a short term fix when deferment or student loan consolidation is not an option.
School loan forbearance and deferment is a good way to keep yourself out of financial trouble. Defaulting on a loan can be financial death, so any way around that is a good thing.
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