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Co-Sign a Loan and It’s All But Certain You’ll Lose

Money is the best deodorant. ~ Elizabeth Taylor ~

As ‘Liz’ points out, money gives off a certain scent, and when people get a whiff of it, you can bet your bottom dollar that you’ll attract certain folks. These people just want to borrow a few dollars, and they’re even quite willing to pay you back… with interest… so where’s the problem?

Unless you’re ready to write it off, do not under any circumstances lend family and friends money. That especially means co-signing for loans. Period. Here’s why. You cannot win. You cannot come out ahead. You have everything to lose and nothing to gain.

If you get paid back then you simply avoided a potential catastrophe. If you don’t get paid back (which may very well be the case) your relationship will never be the same. It usually results in irreparable damage.

“Oh I don’t want you to give me any money, I just want you to co-sign for a loan!”

That’s even worse!

Banks and financial institutions are professional money lenders. That’s what they do. In the same way that Major League Baseball players are the best in the world at playing baseball, bankers and lenders are the best in the world at lending money and evaluating risk. If a friend or relative asks you to co-sign on a loan it can only mean one thing – the banker or lender doesn’t like the odds of getting their money back. In fact, they think their chances are so slim they are saying flat out “No!”

So is that a good reason for you to step in? You’re not stupid. You know full well that your relative or friend is a bad credit risk and yet so often, we reluctantly agree to sign. Why?

Your left hemisphere, logical brain, knows that this is a bad move. Your right hemisphere, emotional brain says “Oh he’s a good guy, things will work out in the end.” Parents sign for their child to buy a car, or a house so he can learn to be responsible. Hmm. Responsibility might be better learned the way you learned. Save and manage your money and voila, you’ll have enough to buy what you need on your own.

You should be aware that co-signing can go a lot deeper than just agreeing to cover the loan.

Not too long ago a friend of mine (I’m told he’s now an ex-friend) called and asked me to co-sign for a new mortgage on the house that he and his girlfriend lived in. Here’s the scene.

Over the course of the past year or so, my friend and his girlfriend had missed a number of mortgage payments. The bank was tired of chasing after their money so they called the loan. My friend quickly scouted around and found a lender who was willing to take the mortgage – and give my friend access to ninety percent of his remaining equity – provided he could find a co-signer.

My “friend” then called to tell me the good news. He had found a new mortgagee and all he needed was for me to agree to co-sign on his girlfriend’s mortgage. (If you’re wondering why my friend’s name wasn’t on the mortgage it’s because he declared bankruptcy several years earlier and was forced to put the house in his girlfriend’s name.) It gets better.

My friend further explained that this was a “really good deal” because the new mortgagee required a much smaller monthly payment than the present mortgagee. In fact, with this smaller monthly payment, and up to ninety percent of the remaining equity available, they could use the equity to pay the monthly bills. As he explained, it was as safe as houses. How could they possibly miss a payment? “Think about it,” he enthused, “it’s a complete no-brainer.”

To further see how delusional some people can get, my friend hasn’t held a job in six years, and from all indications at the time he called, he hadn’t the slightest intention of getting one.

To be fair, I don’t think my friend really had any idea of what he was asking me to do. He “really believed” that I would suffer no more inconvenience than having to go through the trouble of scrawling my name on a piece of paper. In reality, by co-signing that loan I would have been bringing a mountain of responsibility and aggravation on my head.

As a co-signer you are stating that you will take full responsibility for the entire matter. In effect, even if everything goes according to plan (and it seldom will) co-signing can have a devastating effect on your own finances.

As a co-signer the liability immediately goes on your credit record. In fact, this could prevent you from getting a loan, or your own mortgage, because a creditor considers the co-signed loan as one of your obligations – and make no mistake about it, it is!

If you co-sign and your friend misses a payment, the lender can immediately collect from you without first pursuing the borrower. In addition, the amount you owe may be increased by late charges and attorney’s fees if the lender decides to sue for payment. If the lender sues and wins, and he usually will, your wages and property may be taken as payment.

How to Avoid Internet Marketing Scams and Market Your Online Business Successfully

Starting an online business from your home can lead to many great opportunities, as well as the chance to replace your day job with your own full time business. Whether you are an Independent Professional seeking more clients or whether you create an entirely new business on the internet, you can be successful.

But when you are new, it is easy to lose money because you have so many choices. Most new Internet marketers don’t know how to recognize the red flags. Sometimes you’re not even being scammed: you just don’t ask the right questions.

Many newbies pay excessive web hosting fees. “Alan” signed up for a company that promised a free web design. He just had to sign up for 2 years of hosting at $40 a month. He thought it was a good deal till he learned he could pay $9 a month to host all his domains. So he’s paying $30 a month above the going rate for 24 months.

That’s a $720 web design. He could spend considerably less to get started with a simple site.

“Barbara” signed up for a package that promised to deliver all the training she need for her business for several thousand dollars. The company offered a dozen or so slide presentations — not Webinars or videos — online. They explained how to use pay per click, but didn’t discuss the fine points of choosing key word phrases and choosing a niche that wasn’t too crowded. And they didn’t warn Barbara to test her niche to see if she could be profitable at all with her product.

“Carl” paid $3000 for a simple web design for his site. He realize he needed some help with the copy but said, “I don’t feel I can spend more. I just invested $3000 and have nothing left.”

An experienced Internet marketer told Carl, “I could get a comparable site for about $500. This site is very simple — it’s really a template.”.

The people I call Alan, Barbara and Carl are not at all unusual. They’re very smart people. They achieved successful track records in corporate life and off-line businesses. But now they became Internet entrepreneurs trying to get start-up businesses off the ground. They were like explorers who got dropped off in a jungle without a guide.

One red flag all three missed: When they consulted with resources, they were encouraged to focus on design. Not copy. Not strategy. That’s the most common mistake newcomers make: getting lost in graphics, colors and typeface. A professional look is important, but first you need to develop strategy, choose a target market and write your content.

Money and Finance – The Cause of Anxieties for Most Families

Martha was having a restless night. The other day she got a billing statement from her credit card company that told her she was behind schedule on her monthly payment. She also felt harassed every time a debt collector would call her at the office and at home, sometimes even in odd hours of the night. They were also having troubles paying the mortgage and the monthly installments on the new car. Their financial woes are partly due to her husband Ben, who himself admits being a big spender. Ben is an avid car enthusiast who spends a lot of money to “spice up” their Japanese car and make it look like one of those street racers in the movie, “Too Fast, Too Furious.”

The money problems have become so big that both Ben and Martha now experience enormous stress and anxiety every single day. Due to their financial difficulties, they now quarrel a lot and exchange the blame for falling into the debt trap. It is no wonder that money is now one of the leading causes of divorce.

Money, or more appropriately, the lack of money is one of the main reasons for stress and anxiety in marriage. In the United States, the average household has at least $9,200 in credit card debt. The Bens and Marthas hardly know about the strategies and techniques to gain financial success. The common mistake among hard-pressed couples is spending more than they make. Lack of discipline in the use of credit cards also leave many people enslaved to making payments to settle both the principal loan and interest fees.

We all face different challenges and pressures about money. It can be really overwhelming to face these financial problems if nothing is done about them early on. Because of the constant demands to meet our day-to-day living expenses, it also becomes the leading cause of stress and anxiety that can eventually ruin your emotional and physical well-being.

But money should really help us improve our lot and not make our lives miserable. In order to lessen the pressure brought about by financial problems, it may be helpful to read and consider the following financial management advice:

First, develop a realistic budget. This is the very first step you need to take to regain control over your finances . Make a list of all the money you owe or bills to pay — then decide to pay them one by one based on your fixed paying capacity. Also, it is good to make a list of all other sources of income. The next step is to write down all your “fixed” expenses like mortgage, rent, car payments, electricity, credit cards, and insurance premiums. After that, determine just how much money you have left to know exactly how much you have left to spend on other things. It is important to stick to your payment schedule and not create other payables before you finish paying for the priority accounts. It is highly recommended to keep a small notebook that you can use to list down all your expenses. With the small notebook, you can track where your money goes. In addition, using a computer budgeting program can be a helpful tool for balancing your checkbook.